GEE Group Inc. (NYSE MKT: JOB) (“the Company” or “GEE Group”), a provider of professional staffing services and solutions, today announced that GEE Group acquired SNI Companies, a premier provider of professional staffing and recruitment services. The acquisition is expected to be accretive to GAAP earnings per share and expected to generate significant estimated adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA, a non-GAAP financial measure), including anticipated synergies. In calendar 2016, SNI had approximately $113.5 million in revenue with EBITDA (EBITDA, a non-GAAP financial measure) margin of approximately 8.2% and gross margin of approximately 44%. Pro forma historic GAAP revenue (for the respective fiscal years) of the combined company is approximately $197 million, more than double the reported revenue for GEE Group’s fiscal year ended September 30, 2016.
Transaction Details
Under the terms of the merger agreement, GEE Group acquired SNI Companies for consideration of $86 million which was paid at closing. The consideration was comprised of $44.7 million in cash and $28.8 million of GEE convertible preferred stock (which are non-voting and shall be automatically converted into shares of GEE common stock following the receipt by GEE of the approval of its stockholders) and $12.5 million of convertible subordinated notes. In connection with the transaction, GEE Group obtained financing from PNC Bank and MGG Investment Group. The new credit facility consists of a $25 million revolving credit facility and a $48.8 million term loan. The proceeds of the financing were used to finance the cash portion of the purchase price, pay off SNI’s debt (assumed and paid off by GEE), refinance existing GEE Group debt, and pay the transaction expenses. The credit facility provides for additional financing of future strategic acquisitions.
GEE Group expects its increased scale, along with strong revenue and free cash flow generation, to result in rapid deleveraging, creating further equity value and continued financial flexibility. Additionally, the benefits of the combined company include the realization of economies of scale and various synergies that will allow for more operational efficiency.
Proven Veteran Leadership Team
SNI is led by co-founder and current Chairman and CEO Ron Smith, a seasoned staffing executive with over 40 years’ experience in the industry. Smith previously worked for a large international staffing and recruiting firm where he ultimately owned six franchises. After selling his franchises to a large international staffing and recruiting firm in 1988, Smith was promoted to Regional Manager and integrated 20 locations for a large international staffing and recruiting firm.
Upon leaving a large international staffing and recruiting firm in 1992, Smith continued his entrepreneurial efforts by founding Staffing Edge, Inc., a specialty staffing firm focused on temporary and full-time placement in the fields of accounting, information technology, engineering, legal, sales, high-end office clerical, insurance and banking. Staffing Edge generated $36 million in annual revenue within its first six years of operations, earning recognition by Inc. Magazine as the 17th fastest growing private company in the United States. In 1998, Smith’s efforts with Staffing Edge also earned him recognition as Entrepreneur of the Year for the Nebraska/Iowa Regions from Ernst & Young. Smith sold Staffing Edge in 1998 and shortly thereafter co-founded SNI Companies.
Ron has successfully recruited and developed some of the most talented regional leaders, local office managers, and staff members in the recruitment industry today. Their use of state-of-the-art technology and collaborative and specialized delivery models helped to revolutionize the staffing industry and realize outstanding results. Ron Smith, along with his Chief Operating Officer Pete Langlois, has developed SNI Companies into a nationwide leader in the staffing industry which has gained accolades from various industry groups.
SNI Recognized as Award-Winning Leader in the Staffing Industry
