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On Assignment To Buy Privately-held Apex Systems For $600 Mln

Professional staffing company On Assignment Inc. (ASGN) said Tuesday it has agreed to buy privately-held rival Apex Systems Inc. for $600 million. The transaction, expected to close in May 2012, will create one of the largest professional staffing firms and the second-largest IT staffing company in the U.S.

Following the news, shares of On Assignment gained more than 24 percent in extended trade.

Calabasas, California-based On Assignment said that the purchase price is comprised of $383 million in cash, and newly-issued stock valued at $217 million. The company will also retire all of Apex Systems' debt.

Apex Systems is the sixth-largest IT staffing firm in the U.S. Together, Apex Systems and On Assignment will become a $1.3 billion public company, with combined IT staffing revenues exceeding $1 billion.

Excluding transaction-related costs, On Assignment expects the transaction to be accretive on both a pro forma reported and cash earnings per share basis in 2012 and beyond.

The acquisition, which was approved by the boards of directors of both companies, remains subject to approval by On Assignment's shareholders, in addition to regulatory approvals and other customary closing conditions.

Commenting on the deal, Peter Dameris, president and CEO of On Assignment, said, "Because 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. The transaction also achieves On Assignment's five-year strategic plan to reach $1 billion in annual revenue three years ahead of schedule."

In 2011, Richmond, Virginia-based Apex Systems had about $700 million in revenue and adjusted EBITDA of about $65 million. The company, which has achieved a compound annual revenue growth rate or CAGR of 30.4 percent since 2000, expects to achieve double-digit revenue growth in 2012.

The three co-founders of Apex Systems will have representation on the On Assignment board of directors. In addition, Rand Blazer and Ted Hanson, Apex Systems' chief operating officer and chief financial officer, respectively, and other members of the senior management team will remain in place and continue to oversee the day-to-day operations of the business.

On Assignment said it has obtained a commitment for 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 $50 million revolving credit facility and $490 million term loan.

The company will use the proceeds of the term loan to finance the cash portion of the purchase price, to repay debt of both companies, and to pay expenses in connection with the transaction.

Looking ahead to the second half of 2012, On Assignment forecasts reported earnings per share of $0.50 to $0.60, cash earnings per share of $0.77 to $0.88, and revenues of $775 million to $805 million. The forecast takes into account the acquisiton of Apex Systems.

ASGN closed Tuesday's trading at $13.68, down $0.58 or 4.07 percent on a volume of 136,529 shares. However, in after-hours trading, the stock gained $3.32 or 24.27 percent to $17.00.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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