The Corporate Executive Board Company (“CEB” or the “Company”)
(NYSE: EXBD), the leading member-based advisory company, today
announced that it has signed a definitive agreement to acquire SHL,
a global leader in cloud-based talent measurement and management
solutions, from funds managed by HgCapital and Veronis Suhler
Stevenson ("VSS") for $660 million in cash, subject to customary
pre- and post-closing adjustments.
The combination brings together two highly complementary
businesses to create the world’s foremost source of insight on the
measurement and management of talent for business and government.
Marrying CEB’s rich best practices, insights and data with SHL’s
assessments, predictive analytics and robust technology platform
will create a global organization with a greatly enhanced
capability to help clients manage talent, transform operations and
reduce risk.
SHL is the largest global provider of cloud-based solutions for
talent assessment and decision support, enabling client access to
unparalleled data, analytics and insights for assessing and
managing employees and applicants. Headquartered in the U.K., SHL
has operations in Europe, Asia and the U.S. They serve more than
10,000 clients in 111 countries, including more than 40 percent of
the Fortune 500 and over 80 percent of the FTSE 100. Each year, SHL
delivers more than 25 million assessments in over 30 languages. SHL
was acquired by HgCapital in 2006 in a take-private transaction,
and VSS became a co-investor in 2011 following SHL’s merger with
the talent assessment firm PreVisor.
The acquisition will significantly expand the addressable market
of both companies through an increased global presence across all
major developed and emerging markets, enhancing CEB’s ability to
scale and extend its existing platform with technology-driven
solutions. The combined company will offer compelling career
opportunities for a talented base of more than 3,000 employees as
part of a larger, stronger global organization committed to
advancing the science and practice of talent management.
Said Tom Monahan, Chairman and CEO of CEB, “For more than two
decades, CEB has helped senior executives manage talent with the
same rigor and analytic depth that they use to manage other vital
corporate assets. We see a continual increase in the demand for
talent measurement and analytics to drive organizational
performance. The combination of these enterprises creates a
uniquely valuable resource to help executives apply predictive
analysis to the selection, development and management of talent.
SHL’s established global customer base and rich talent analytics,
its leadership position in corporate talent measurement and its
proven business model – which delivers highly recurring revenues,
attractive sustainable margins and strong cash flows – make it a
compelling strategic and financial fit for CEB. This acquisition
will accelerate all elements of our existing growth strategy, and
generate significant value for our clients and shareholders.”
Said David Leigh, CEO of SHL, “After 35 years of market
leadership in driving efficiency, productivity and competitive
advantage for our clients, we are extraordinarily pleased to be
joining with CEB. The two companies share a commitment to
delivering actionable insights for clients. This is an exciting new
chapter for SHL and its talented employees, who will have new
opportunities as part of the combination, and whose expertise will
be valued by the broader combined client base.”
Continued Mr. Monahan, “By capitalizing on the combined
company’s deep functional knowledge, rich data sets and scalable
delivery platform, this transaction will enhance our offerings
across all functional areas, including HR, Finance, IT, Legal and
Sales and Marketing. This acquisition is an important, exciting
step in the execution of our ongoing growth strategy of deepening
member relationships and delivering high-value support to more of
their important work.”
Concluded Mr. Monahan, “We expect the acquisition to be
accretive to CEB’s 2013 EPS, without dependence on realizing
significant cost synergies. We project sufficient cash flow to
maintain our current dividend growth policy while also deleveraging
in the near-term. We are confident that we have the infrastructure
and resources in place to successfully and seamlessly integrate SHL
into the growing CEB suite of offerings, and we look forward to
welcoming all of SHL into the CEB family.”
In 2011, SHL’s total revenues were $209.8 million and Adjusted
EBITDA was $56.9 million. CEB’s revenues were $484.7 million and
Adjusted EBITDA was $112.6 million in 2011. CEB expects the
transaction to be accretive to EPS in 2013 and to generate
approximately $5 million of annualized pre-tax cost synergies
beginning in 2013. The acquisition is expected to close in the
third quarter of 2012, subject to clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. CEB will fund
the acquisition with borrowings under a new $625 million secured
credit facility that CEB entered into at the time it signed the
agreement to acquire SHL, together with approximately $85 million
of cash on hand. The new credit facility will include $575 million
of funded term loans and a new $50 million revolving credit
facility, which will replace CEB’s existing $100 million credit
facility upon closing of the SHL acquisition.
CEB also today reaffirmed its full-year 2012 outlook as it
relates to the existing business (excluding any impact of the SHL
acquisition). CEB plans to update its annual guidance with combined
company expectations once the SHL acquisition is completed.
Allen & Company LLC and BofA Merrill Lynch are acting as
CEB’s financial advisors, and Kirkland & Ellis LLP is acting as
the Company’s legal advisor. BofA Merrill Lynch and Barclays are
providing committed debt financing for the transaction.
SHL's shareholders, including HgCapital and VSS, were advised on
this transaction by Morgan Stanley, Weil, Gotshal & Manges and
Deloitte.
CONFERENCE CALL AND WEBCAST
CEB will conduct an investor conference call to discuss this
announcement today at 5:00 p.m. (Eastern Time). To access the call,
please use one of the following dial-in numbers: 800-638-5439 (U.S.
and Canada) and 617-614-3945 (International), and enter the
Conference ID number: 64826709.
A live broadcast of the conference call will be available online
by visiting www.executiveboard.com and clicking on the link to
Investors Relations on the website. Related presentation materials
will be posted to the Company’s Investor Relations section in Adobe
Acrobat format prior to the call.
A telephone replay of the call will be available until July 9,
2012. The replay dial-in numbers are 888-286-8010 (U.S. and Canada)
and 617-801-6888 (International), and the Conference ID number is
62064567. In addition, the call will be archived on the Company's
web site in the Investor Relations Section.
ABOUT CEB
CEB is the leading member-based advisory company. By combining
the best practices of thousands of member companies with our
advanced research methodologies and human capital analytics, we
equip senior leaders and their teams with insight and actionable
solutions to transform operations. This distinctive approach,
pioneered by CEB, enables executives to harness peer perspectives
and tap into breakthrough innovation and improvement without costly
consulting or reinvention. The CEB member network includes more
than 16,000 executives and the majority of top companies globally.
For more information visit www.executiveboard.com.
FINANCIAL INFORMATION AND NON-GAAP FINANCIAL MEASURES
SHL’s 2011 financial results were prepared and audited in
accordance with UK generally accepted accounting practice (“UK
GAAP”) and were reported in British pounds sterling (“GBP”). These
amounts have been converted to U.S. dollars (“USD”) using an
exchange rate of 1.6039 USD to 1 GBP, which was the average spot
rate during 2011. In addition, there are differences between U.S.
generally accepted accounting principles (“US GAAP”) and UK GAAP,
and the amounts reported do not reflect the impact of any changes
that would be required if SHL’s financial results were to be
reported in accordance with US GAAP. Assuming we complete the
acquisition of SHL, we will provide information on any material
effects on SHL’s reported historical results of reconciling UK GAAP
to US GAAP on an amended Current Report on Form 8-K that is
required to be filed within 71 days following the date on which we
are required to file a Report on Form 8-K disclosing the completion
of the acquisition of SHL. The amended Report on Form 8-K will
include both historical financial information for SHL and pro forma
information for the combined business. If SHL’s financial results
had been prepared and reported in accordance with US GAAP, such
results would differ from those disclosed in this press
release.
This press release and other public statements that we make
include a discussion of Adjusted EBITDA for CEB and SHL, which are
non-GAAP financial measures provided as a complement to the results
provided in accordance with U.K. GAAP and U.S GAAP. The term
"Adjusted EBITDA" refers to a financial measure that we define as
net income before loss from discontinued operations, net of
provision for income taxes; interest income, net; depreciation and
amortization; provision for income taxes; and acquisition related
costs. We believe this non-GAAP financial measure is relevant and
useful supplemental information for our investors. We use this
non-GAAP financial measure for internal budgeting and other
managerial purposes, when publicly providing CEB’s business outlook
and as a measurement for potential acquisitions. A limitation
associated with Adjusted EBITDA is that it does not reflect the
periodic costs of certain capitalized tangible and intangible
assets used in generating revenues in our business. Management
evaluates the costs of such tangible and intangible assets through
other financial measures such as capital expenditures. Management
compensates for these limitations by also relying on the comparable
GAAP financial measure of Operating profit, which includes
depreciation and amortization. This non-GAAP measure may be
considered in addition to results prepared in accordance with GAAP,
but should not be considered a substitute for, or superior to, GAAP
results. We intend to continue to provide non-GAAP financial
measures as part of our future earnings discussions and, therefore,
the inclusion of non-GAAP financial measures will provide
consistency in our financial reporting.
A reconciliation of 2011 Adjusted EBITDA to the most directly
comparable GAAP measure is provided below.
CEB (1) SHL (2) Combined Company
(3) Net income $52,655 $ 7,859 $60,514 Loss from
discontinued operations, net of provision for income taxes
4,792
-
4,792
Income from continuing operations 57,447 7,859 65,306 Interest
(income) expense, net (596) 9,623 9,027 Depreciation and
amortization 16,928 20,851 37,779 Provision for income taxes 38,860
5,614 44,474 Acquisition and other related costs (4) - 12,992
12,992 Adjusted EBITDA $112,639 $56,939 $169,578 Adjusted EBITDA
margin 23.2% 27.1% 24.4%
(1) Amounts in this column are derived from CEB’s 2011 audited
consolidated financial statements in accordance with US GAAP.
(2) Amounts in this column are derived from SHL’s 2011 audited
consolidated financial statements in accordance with UK GAAP.
(3) The combined amounts are a simple mathematical calculation
of the CEB and SHL results in the prior two columns and are not
necessarily indicative of the financial results of the combined
company had CEB’s and SHL’s results been consolidated during the
period reported. In addition, the amounts in this column do not
reflect pro forma purchase accounting adjustments required to
present the acquisition as of the beginning of 2011.
(4) For SHL, includes transaction and integration costs from the
PreVisor acquisition as well as information technology in-sourcing
costs.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Statements using words such as “estimates,” “expects,”
“anticipates,” “projects,” “plans,” “intends,” “believes,”
“forecasts” and variations of such words or similar expressions are
intended to identify forward-looking statements. We also disclose
non-historical information that represents management’s
expectations with respect to the proposed acquisition of SHL, which
are based on numerous assumptions. These statements are not
guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to be materially
different from projected results. You are hereby cautioned that
these statements are based upon our expectations at the time we
make them and may be affected by important factors including, among
others, the factors set forth below and in our filings with the
U.S. Securities and Exchange Commission, and consequently, actual
operations and results may differ materially from the results
discussed in the forward-looking statements. Our expectations,
beliefs and projections are expressed in good faith and we believe
there is a reasonable basis for them. There can be no assurance as
to the timing of the closing of the transaction with SHL, or
whether the transaction will close at all or on the terms described
herein. In addition, the following factors relating to the
acquisition and the new credit facility, among others, could cause
or contribute to material differences between actual results and
those described in our forward-looking statements: we may not
realize the anticipated benefits of the proposed acquisition of
SHL; the terms and conditions of required regulatory approvals for
the transaction may affect our future operations and results; we
may not be able to implement and execute planned integration
measures on a timely basis or at all; the businesses of CEB and SHL
may not be combined successfully, or the combination may take
longer or cost more to accomplish than expected; potential
operating costs, customer loss and business disruption (including
employee loss or turnover) following the acquisition may be greater
than expected; expected cost savings from the acquisition may not
be fully realized or may not be realized within the expected time
frames; after completion of the acquisition, we will face various
risks as a result of incurring significant leverage to fund the
acquisition, including that we may not generate sufficient cash
flow to make interest payments and required principal repayments
under our new credit facility or may face liquidity constraints, we
may not be able to comply with financial covenants and ratios, and
the restrictions imposed by the financial covenants and ratios and
the other covenants and requirements of our new credit facility may
significantly restrict our flexibility in operating our business in
the future; if we are unable to comply with the terms of our new
credit facility, any defaults could result in material and adverse
effects to our business and its future financial condition and
performance . Additional factors that could cause CEB’s actual
results to differ materially from those described in the
forward-looking statements, include our dependence on renewals of
our membership-based services, the sale of additional programs to
existing members and our ability to attract new members, our
potential failure to adapt to member needs and demands, our
potential inability to attract and retain a significant number of
highly skilled employees, fluctuations in operating results, our
potential inability to protect our intellectual property rights,
our potential exposure to data protection requirements in numerous
geographies, our potential exposure to loss of revenue resulting
from our service guarantee, exposure to litigation related to our
content, various factors that could affect our estimated income tax
rate or our ability to use our existing deferred tax assets,
changes in estimates or assumptions used to prepare our financial
statements, our potential inability to effectively anticipate, plan
for and respond to changing economic and financial markets
conditions, especially in light of the ongoing uncertainty in the
worldwide economy and possible volatility of our stock price, as
well as other forward-looking statements included in our periodic
reports filed with the SEC. Given these uncertainties, you should
not place undue reliance on these forward-looking statements. These
forward-looking statements represent estimates and assumptions only
as of the date of this presentation, and no duty is undertaken to
update them to reflect new information, events or circumstances.
The forward-looking statements in this press release are made as of
July 2, 2012.
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