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GEO Group Acquires Electronic Monitoring Firm for $415 Million

by David M. Ruetter

The GEO Group, the nation’s second-largest private prison company, announced on December 21, 2010 that it will pay $415 million in an all-cash deal to acquire Behavioral Interventions, Inc. (BI). The purchase allows GEO to expand beyond detention services into the area of community supervision.

BI was founded in 1978; the company oversees more than 60,000 offenders in all 50 states through contracts with around 900 federal, state and local agencies. BI uses technologies that include radio frequency and GPS monitoring, voice identification, and remote alcohol detection systems to supervise parolees, probationers and pretrial defendants. “BI also provides community-based re-entry services for approximately 1,700 parolees,” according to a GEO press release.

“This acquisition will distinguish GEO as the premier service provider with full continuum of care solutions for correctional, detention and residential treatment worldwide,” said George C. Zoley, GEO’s chairman and CEO. Currently, GEO operates 81,000 beds at 118 prisons, jails and residential treatment facilities in the U.S., Australia, South Africa and the United Kingdom.

With BI being integrated into GEO’s subsidiary, GEO Care, GEO will be able to “address all aspects and reach all segments across the entire corrections, detention and residential treatment spectrum, providing a better basis for meaningful measurement of program outcomes,” said Zoley.

Like all corporate business decisions, GEO’s purchase of BI is aimed at achieving higher profits. “The acquisition is expected to increase GEO’s total annual revenues by approximately $115 million to more than $1.6 billion in 2011,” stated GEO’s press release. In addition, GEO anticipates “annual cost efficiencies of $3-5 million.”

Several large banks provided financing to make the deal happen. “BNP Paribas, WF Investment Holdings (a subsidiary of Wells Fargo & Company), BofA Merrill Lynch, Barclays Capital, SunTrust Robinson Humphrey, and JP Morgan Chase have provided $425 million of committed financing, which will be used to finance the all-cash transaction,” GEO stated.

Such financing added to GEO’s debt load, however, causing Standard & Poor’s Rating Services to lower its rating on the company’s bonds. The one-notch downgrade to B+, which is four levels into junk territory, reflects a “meaningful deterioration” in GEO’s credit metrics. The BI acquisition and a previous $730 million deal to buy rival private prison operator Cornell Corrections will give GEO around $1.5 billion in outstanding debt.

GEO Group announced on February 11, 2011 that it had finalized the company’s purchase of BI. GEO’s stock was trading at about $24.31/share as of mid-March.

Sources: GEO press release, Wall Street Journal,

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