On Assignment Closes Acquisition of Apex Systems
On Assignment Closes Acquisition of Apex Systems
Company Becomes the Second Largest IT Staffing Firm in the United States
On Assignment, Inc has announced the completion of its acquisition of Apex Systems, Inc. ("Apex Systems"), a privately held leading information technology staffing and services firm located in Richmond, Virginia. This closing follows the execution and announcement of the Agreement of Merger between the parties on March 20, 2012.
"With Apex Systems as our newest division, On Assignment is now even better positioned in one of the most attractive and fast-growing segments in the staffing industry," said Peter T. Dameris, President and Chief Executive Officer of On Assignment. "Apex Systems' IT staffing services are complementary to those offered by our existing information technology division, Oxford Global Resources. Given the offerings do not compete, the acquisition will create value for our clients, shareholders and employees by expanding our presence in the IT staffing market."
Under the terms of the Agreement of Merger, On Assignment acquired all of Apex Systems' equity and retired all of its debt for a total of approximately $600 million. The purchase price is comprised of $383 million in cash and 14.3 million shares of newly issued stock. The transaction is expected to be accretive on a pro forma GAAP basis in 2012 and beyond, excluding any transaction-related costs.
The acquisition was approved by the Boards of Directors of On Assignment and Apex Systems. Additionally, On Assignment's shareholders approved the issuance of shares of common stock to consummate the merger between On Assignment and Apex Systems at its Annual Meeting on May 14, 2012.
In connection with the closing, On Assignment obtained a new $540 million senior secured credit facility from Wells Fargo Bank, N.A., Bank of America Merrill Lynch, and Deutsche Bank Trust Company Americas. The credit facility provides for a $75 million revolving credit facility and $100 million term loan A and a $365 million term loan B. The proceeds of $490 million from the new senior secured credit facility was used to pay the cash portion of the purchase price, to repay existing indebtedness of On Assignment and Apex Systems, and to pay fees and expenses in connection with the transaction.
Prior to the merger, Apex Systems was the 6th largest and one of the fastest growing IT staffing firms in the United States. In 2011, Apex Systems had approximately $700 million in revenue and adjusted EBITDA of approximately $65 million. Apex Systems has achieved a compound annual revenue growth rate (CAGR) of 30.4% since 2000 and expects to achieve double-digit top-line growth in 2012.
Apex Systems will continue to operate substantially as it has in the past with the same leadership team. Rand Blazer, will continue to run Apex Systems assuming the role of President. Ted Hanson will continue as Chief Financial Officer of Apex Systems. Apex Systems' senior management team will remain in place and continue with its day-to-day operations.
"We look forward to working closely with the talented team at Apex Systems to realize the many growth opportunities ahead," Dameris said.
Financial Estimates for the Second Quarter of 2012 that Include the Impact of the Apex Acquisition
With the close of this transaction, On Assignment's revised financial estimates for the second quarter of 2012 are as follows:
-- Revenues of $278 million to $280 million
-- Gross margin of approximately 31.2%
-- SG&A of approximately $65 million, which excludes any acquisition-related expenses, but includes depreciation of approximately $1.6 million, amortization of approximately $2.6 million and approximately $2.5 million of equity based compensation
-- Adjusted EBITDA of $28.1 to $29.0
-- Net Income of $10.4 to $11.0
-- Earnings per diluted share of $0.23 to $0.24
-- Fully diluted shares outstanding of 45,400,000
The estimates above include contribution from Apex Systems as of May 16, 2012 forward and On Assignment's previous guidance given on April 26, 2012. The estimates take into account the Company's normal seasonal operating patterns.
With this transaction, On Assignment becomes one of the largest professional staffing firms in the United States and the 2nd largest IT staffing firm in the United States. On a pro forma basis, 2011 revenue of the combined entity was $1.3 billion.
In connection with the closing, On Assignment also granted to 97 Apex Systems employees restricted stock unit awards covering an aggregate 825,327 On Assignment shares. Of these, Mr. Blazer and Mr. Hanson were each granted awards covering 32,895 On Assignment shares. The awards granted to Mr. Blazer and Mr. Hanson will vest, subject to continued service, (a) as to 40% of each award over three years based on the achievement of performance targets for each of the three years following the closing and (b) as to 60% of the awards in three equal installments on each of the first three anniversaries of the closing date. The awards granted to the remaining Apex Systems employees will vest, subject to the employee's continued service, as to 25% of each award on the first anniversary of the closing and as to 75% of the award in twelve substantially equal quarterly installments thereafter. The restricted stock unit awards were granted to the Apex Systems employees, including Mr. Blazer and Mr. Hanson, as employment inducement awards pursuant to NASDAQ rules.