Transaction Enables On Assignment to Meet
Growing Demand for Professionals with Digital/Creative and IT
Skills
Acquisition Expected to be Accretive to On
Assignment EPS
Complementary End Markets Create New
Opportunities for Growth
On Assignment, Inc. (NYSE: ASGN), a leading global provider of
diversified professional staffing solutions, announced today that
it has signed a definitive agreement to acquire privately-held
Creative Circle, LLC for $570 million in cash and equity, and up to
an additional $30 million based on future operating performance.
With the addition of Creative Circle, On Assignment will be able to
provide broader staffing services that support its clients as they
transform their business models and marketing demands towards
digital enterprises. The acquisition is expected to be immediately
accretive to On Assignment’s GAAP earnings per share and adjusted
earnings per share (without any synergy savings) in 2015.
Creative Circle is one of the largest digital/creative staffing
firms in North America and provides digital, marketing,
advertising, and creative talent to both creative agencies and
marketing departments of leading companies. Creative Circle has
achieved a three- year compounded annual growth rate of 26% since
2011. In 2014, the company had approximately $226 million in
revenues with an EBITDA margin of approximately 21%. Creative
Circle expects to achieve double-digit top line growth in 2015.
“Technology has accelerated digital innovation and the way
consumers access content. As such, our clients are faced with the
need to remain competitive by transforming their business models to
effectively respond to consumer demand for digital information and
services on a real time basis,” said Peter T. Dameris, On
Assignment’s President and Chief Executive Officer. “By working
together, we can do more for our clients to accelerate their
transformation to a digital platform by providing our respective
clients with a more complete solution in the technology and
digital/creative space.
“Our two companies share a common goal of putting people to work
in challenging roles and the timing could not be better as the
lines between IT and marketing departments are starting to converge
as consumers demand real time content from any device anywhere in
the world.
“On Assignment's strength in technology staffing combined with
Creative Circle’s expertise in the digital/creative space will
allow us to engage the CMO along with the CIO to provide solutions
that meet the increasing needs of both groups while driving greater
demand for our traditional services.”
Creative Circle will become a division of On Assignment and
continue to operate under the Creative Circle brand name. The
current leadership team will continue to oversee the day-to-day
operations of the business.
“On Assignment is one of the more innovative and competitive
companies within the professional staffing space,” said Lawrence
Serf, Creative Circle’s Chief Executive Officer. “Like On
Assignment, Creative Circle provides its clients with the highest
quality solutions to staffing challenges and offers professionals
unparalleled employment opportunities in their chosen field. We are
excited to be an important part of On Assignment’s ongoing
growth.”
“On Assignment and Creative Circle share a very similar culture
and vision,” said Dennis Masel, Creative Circle’s Chief Operating
Officer. “As we analyzed how best to continue to grow our company,
joining On Assignment quickly became the logical choice.”
The transaction will expand On Assignment’s consolidated gross
and EBITDA margins. On a pro forma basis, 2014 revenues and EBITDA
margin were $2 billion and 12.4% respectively.
Dameris concluded, “Additionally, this acquisition brings us
closer to achieving our $3 billion target in annual revenues by
2018.”
Transaction Details
Under terms of the definitive agreement, On Assignment will
acquire all of Creative Circle’s equity for consideration of $570
million to be paid at closing, plus additional consideration of up
to $30 million if certain performance targets for 2015 are
achieved. The consideration at closing is comprised of $540 million
in cash and $30 million of common stock.
In connection with the transaction, On Assignment has obtained a
secured financing commitment for $975 million from Wells Fargo
Bank, National Association. The new credit facility consists of a
$100 million revolving credit facility (undrawn at close) and an
$875 million term loan. The proceeds of the term B loan will be
used to finance the cash portion of the purchase price and
refinance existing On Assignment debt. Upon closing of the
transaction, funded debt of the combined company is expected to
total approximately 3.7x estimated pro forma adjusted EBITDA for
the twelve months ended June 30, 2015.
For income tax reporting purposes, the acquisition will be
treated as an asset purchase rather than a stock purchase.
Consequently, the Company’s tax basis in the net assets acquired
will equal the purchase consideration, resulting in an annual cash
income tax savings of approximately $14 million over the next 15
years from the amortization of intangible assets.
On Assignment expects its increased scale, along with strong
revenue and free cash flow generation, to result in rapid
deleveraging, creating further equity value. In connection with the
acquisition, On Assignment intends to make grants of restricted
stock units to certain employees of Creative Circle as employment
inducement awards pursuant to the NYSE rules.
The acquisition remains subject to regulatory approvals and
customary closing conditions. The transaction is expected to close
before the end of the second quarter.
Financial Estimates for the Second Half of 2015
On Assignment is providing estimates of its operating results
from continuing operations for the second half of 2015, which
assume no significant deterioration in the staffing markets that On
Assignment serves. These estimates do not include any (i)
acquisition, integration or strategic planning expenses or (ii)
write-off of deferred loan costs on the current credit facility
that will be replaced by the previously discussed new credit
facility.
- Revenues of $1.087 billion to $1.103
billion
- Gross margin of 33.6 percent to 34.0
percent
- SG&A expense (excludes amortization
of intangible assets) of $245.5 million to $251.0 million (includes
$8.4 million in depreciation and $10.0 million in equity-based
compensation expense)
- Amortization of intangible assets of
$22.5 million
- Adjusted EBITDA of $138.0 million to
$142.1 million
- Effective tax rate of 40.0 percent
- Interest expense of $20.6 million
(includes $1.6 million of non-cash amortization of deferred loan
costs)
- Adjusted income from continuing
operations of $80.7 million to $83.2 million
- Adjusted income from continuing
operations per diluted share of $1.53 to $1.57
- Income from continuing operations of
$45.9 million to $48.4 million
- Income from continuing operations per
diluted share of $0.87 to $0.92
- Diluted shares outstanding of 52.8
million
The above estimates assume billable days of 123.6 for the second
half of the year, which are 2.0 days more than the first half of
the year and 1.5 fewer days than the second half of 2014. The
estimates also assume a foreign currency exchange rate of 1.08 (US
dollar to the EURO).
The mid-point of the revenue range above implies year-over-year
pro forma growth of 8.4 percent (9.2 percent on a constant currency
basis). The revenue estimates assume mid-to-high single-digit
growth for Apex and Oxford, and a year-over-year decline for Life
Sciences Europe (flat on a constant currency basis). The estimates
assume Creative Circle will generate revenues of $138.9 million to
$151.7 million in the second half of 2015 (year-over-year growth of
15.2% to 25.8%).
Legal and Financial Advisors
On Assignment retained Sullivan & Cromwell LLP as legal
counsel on the transaction, Latham & Watkins LLP as legal
counsel on the secured financing commitment and Moelis &
Company as exclusive financial advisor. Creative Circle retained
Debevoise & Plimpton LLP as legal counsel and Wells Fargo
Securities as exclusive financial advisor.
Conference Call
On Assignment will hold a conference call with analysts and
stockholders today at 8:30 a.m. EDT. The dial-in number is
(888) 254-2817 ((913) 312-0376 for callers outside the United
States), and the conference ID number is 359694. Participants
should dial in ten minutes before the call. A replay of the
conference call will be available beginning today at 11:30
a.m. EDT and ending at midnight EDT on May 25,
2015. The access number for the replay is (800) 475-6701 ((320)
365-3844 for callers outside the United States), and the
conference ID number 359694.
This call is being webcast by Thomson/CCBN and can be
accessed via On Assignment’s web site
at www.onassignment.com. Individual investors can also listen
at Thomson/CCBN’s site at www.fulldisclosure.com or
by visiting any of the investor sites in Thomson/CCBN’s
Individual Investor Network. We have also posted on our website a
presentation regarding this transaction.
About Creative Circle
Founded in 2002, Creative Circle is one of the largest creative
staffing agencies in North America, providing digital, marketing,
advertising, and creative talent to a wide range of companies.
Creative Circle has developed a business model that enables it to
attract and place high-level talent on demand. The collaborative,
team-based approach between account executives and recruiters
include a diligent screening process of all candidates to ensure
the right fit for each and every placement.
About On Assignment
On Assignment, Inc. is a leading global provider of
in-demand, skilled professionals in the growing technology and life
sciences sectors, where quality people are the key to
success. The Company goes beyond matching résumés with
job descriptions to match people they know into positions they
understand for temporary, contract-to-hire, and direct hire
assignments. Clients recognize On Assignment for its
quality candidates, quick response, and successful assignments.
Professionals think of On Assignment as career-building
partners with the depth and breadth of experience to help them
reach their goals.
On Assignment, which is based in Calabasas,
California, was founded in 1985 and went public in 1992. The
Company has a network of branch offices throughout the United
States, Canada, United
Kingdom, Netherlands, Ireland, Belgium, Spain,
and Switzerland. To learn more,
visit http://www.onassignment.com.
Reasons for Presentation of Non-GAAP Financial
Measures
Statements in this release may include non-GAAP financial
measures. Such information is provided as additional information,
not as an alternative to our consolidated financial statements
presented in accordance with Generally Accepted Accounting
Principles in the United States ("GAAP"). Such measures also are
used to determine a portion of the compensation for some of our
executives and employees. We believe the non-GAAP financial
measures provide useful information to management, investors and
prospective investors by excluding certain charges and other
amounts that we believe are not indicative of our core operating
results. These non-GAAP measures are included to provide
management, our investors and prospective investors with an
alternative method for assessing our operating results in a manner
that is focused on the performance of our ongoing operations and to
provide a more consistent basis for comparison between quarters.
One of the non-GAAP financial measures presented is EBITDA
(earnings before interest, taxes, depreciation, and amortization of
intangible assets), other terms include Adjusted EBITDA (EBITDA
plus equity-based compensation expense, impairment charges,
write-off of loan costs, and acquisition, integration and strategic
planning expenses) and Non-GAAP income from continuing operations
(Income from continuing operations, plus write-off of loan costs,
and acquisition, integration and strategic planning expenses, net
of tax) and Adjusted income from continuing operations and related
per share amounts. These terms might not be calculated in the same
manner as, and thus might not be comparable to, similarly titled
measures reported by other companies.
Safe Harbor
Certain statements made in this news release are
“forward-looking statements” within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended, and involve a
high degree of risk and uncertainty. Forward-looking statements
include statements regarding the Company's anticipated financial
and operating performance in 2015, the expected timing of the
closing of the transaction and other statements regarding the
expected performance of On Assignment and of the combined company.
All statements in this release, other than those setting forth
strictly historical information, are forward-looking statements.
Forward-looking statements are not guarantees of future
performance, and actual results might differ materially. In
particular, the Company makes no assurances that the estimates of
revenues, gross margin, SG&A, Adjusted EBITDA, income from
continuing operations, adjusted income from continuing operations,
earnings per share or earnings per diluted share set forth above
will be achieved. Factors that could cause or contribute to such
differences include actual demand for our services, our ability to
attract, train and retain qualified staffing consultants, our
ability to remain competitive in obtaining and retaining clients,
the availability of qualified temporary professionals, management
of our growth, continued performance of our enterprise-wide
information systems, our ability to manage our potential or actual
litigation matters, the successful integration of our recently
acquired subsidiaries, the successful implementation of our
five-year strategic plan, and other risks detailed from time to
time in our reports filed with the Securities and Exchange
Commission ("SEC"), including our Annual Report on Form 10-K
for the year ended December 31, 2014, as filed with
the SEC on March 2, 2015. We specifically disclaim
any intention or duty to update any forward-looking statements
contained in this news release.
Media Inquiries:Muirfield PartnersMickey MandelbaumMaya
Pogoda(310) 785-0810orInvestor Inquiries:On Assignment, Inc.Ed
PierceChief Financial Officer(818) 878-7900
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