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GEO Group Buys Out Correctional Services Corporation
In November 2005, GEO Group, the second-largest private prison company in the U.S., finalized its purchase of the Sarasota, Florida-based Correctional Services Corporation (CSC) for $6 a share -- a total of $62 million in cash -- and the assumption of $124 million of CSC's debt. GEO had previously announced a downward revision of its earnings forecast for the third and fourth quarters and 2005 overall. The closing price of CSC stock on July 14, 2005, the day CSC entered into an Agreement and Plan of merger with GEO, was $4.39 per share. Wall Street seemed undeterred by GEO's payment of a 37% premium for CSC stock, as the listed value of both corporations' stock rose significantly the day after the announcement of the buyout. GEO gained $0.62 to $25.93 a share while CSC gained $1.43 to $5.82 a share.
Under the buyout agreement, GEO will assume management of CSC's 15 adult correctional facilities with a total capacity of 7,500 beds. In a related transaction, CSC CEO James Slattery agreed to buy back the company's juvenile services division, Youth Services International (YSI), for $3.75 million and will continue to operate YSI's 17 juvenile facilities with a total of 1,300 beds.
GEO's purchase of CSC was contingent on CSC's settlement of a $38.8 million jury verdict against the company resulting from the 2001 death of Bryan Dale Alexander, an 18-year-old prisoner at a CSC-operated boot camp in Mansfield, Texas. Alexander died of a rare penicillin-resistant type of pneumonia after being denied timely medical care [see PLN, Feb. 2004]. The settlement terms were confidential; however, CSC reportedly contributed $2.7 million toward the total settlement amount with the balance being paid by the company's insurers.
The CSC buyout is merely the latest manifestation of a trend toward consolidation in the private prison industry, an inhumane industry whose motto might be Companies Love Misery." GEO Group Corp., formerly known as Wackenhut Corrections, and Corrections Corporation of America are the dominant private prison companies in the U.S. GEO's acquisition of CSC increases the company's operations to a combined total of 55 facilities with approximately 47,465 beds.
Sources: Palm Beach Post, www.newcoast.com
Under the buyout agreement, GEO will assume management of CSC's 15 adult correctional facilities with a total capacity of 7,500 beds. In a related transaction, CSC CEO James Slattery agreed to buy back the company's juvenile services division, Youth Services International (YSI), for $3.75 million and will continue to operate YSI's 17 juvenile facilities with a total of 1,300 beds.
GEO's purchase of CSC was contingent on CSC's settlement of a $38.8 million jury verdict against the company resulting from the 2001 death of Bryan Dale Alexander, an 18-year-old prisoner at a CSC-operated boot camp in Mansfield, Texas. Alexander died of a rare penicillin-resistant type of pneumonia after being denied timely medical care [see PLN, Feb. 2004]. The settlement terms were confidential; however, CSC reportedly contributed $2.7 million toward the total settlement amount with the balance being paid by the company's insurers.
The CSC buyout is merely the latest manifestation of a trend toward consolidation in the private prison industry, an inhumane industry whose motto might be Companies Love Misery." GEO Group Corp., formerly known as Wackenhut Corrections, and Corrections Corporation of America are the dominant private prison companies in the U.S. GEO's acquisition of CSC increases the company's operations to a combined total of 55 facilities with approximately 47,465 beds.
Sources: Palm Beach Post, www.newcoast.com
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