ATLANTA - First Advantage Corporation (NASDAQ:FA), a global leader in background screening and identity verification solutions, announced it has agreed to acquire Sterling Check Corp (NASDAQ:STER) in a deal valued at approximately $2.2 billion, including debt.
The agreement, which involves a mix of cash and stock, will enhance First Advantage's technology offerings and is expected to generate significant financial synergies.
The transaction, announced today, will unite two complementary businesses, expanding the range of services available to customers in various industries, including healthcare, financial services, and transportation. The companies anticipate at least $50 million in run-rate synergies, leading to immediate double-digit earnings per share (EPS) accretion on a run-rate synergy basis.
The acquisition will combine First Advantage's and Sterling's revenues, which totaled $1.5 billion as of December 31, 2023. The merger is aimed at increasing operational efficiency, reducing seasonality impacts, and accelerating earnings growth potential through topline development and deleveraging.
Scott Staples, CEO of First Advantage, expressed enthusiasm about the acquisition, noting the opportunity to enhance customer and applicant experiences through increased investment in AI and digital identification technologies. Josh Peirez, CEO of Sterling, also welcomed the merger, highlighting the added value for shareholders and the expanded suite of solutions for clients.
Under the terms of the agreement, Sterling shareholders can choose to receive $16.73 in cash or 0.979 shares of First Advantage common stock for each Sterling share they own. The cash consideration represents a 35% premium over Sterling's closing price on February 28, 2024.
After the transaction is finalized, Sterling shareholders will own roughly 16% of the combined entity, while current First Advantage shareholders will hold approximately 84%.
The cash portion of the deal and Sterling's existing debt will be financed by First Advantage through $1.8 billion in new debt and existing cash reserves. Financing has been fully secured with commitments from several financial institutions.
The transaction has received unanimous approval from both companies' Boards of Directors and is expected to close in the third quarter of 2024, pending regulatory approvals and other customary closing conditions. Following the merger, Scott Staples will continue to lead First Advantage as CEO, and Josh Peirez will be offered a seat on the First Advantage Board of Directors.
This strategic move is based on a press release statement and aims to create long-term value for both companies and their stakeholders by leveraging their combined strengths and capabilities in the background screening and identity services market.
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