First Advantage slumps on deal to buy Sterling Check, downbeat forecast

Sterling Check

29/02/2024 13:40

** Shares of background screening services provider First
Advantage  FA.O  fall 12.9% to $14.67 premarket
    ** Co to buy rival Sterling Check  STER.O  in $2.2 bln
cash-and-stock deal - $1.2 bln in cash, 27.15 mln shares of FA
    ** Deal expected to deliver cost-savings of at least $50
mln, implying immediate double-digit EPS accretion on a run-rate
synergy basis
    ** FA investors expected to own ~84% of the merged firm
after closing, likely in Q3 2024
    ** Sterling Check shares up 25.4% at $15.58 premarket 
    ** FA forecasts FY24 revenue between $750 mln and $800 mln;
below Wall Street view of $820.9 mln - LSEG data
    ** Sees FY24 adj. EPS of $0.88 to $0.98; below analysts'
estimate of $1.08
    ** Q4 revenue of $202.6 mln was below market view of $211.1
mln; adj. EPS of $0.29 compared with estimate of $0.30
    ** Four of 10 brokerages rate FA "buy" or higher, six
"hold"; their median PT is $16
    ** In 2023, FA advanced 41.5%

 (Reporting by Khushi Singh in Bengaluru)
 ((Khushi.Singh@thomsonreuters.com;))