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First Advantage plans $1.8 billion term loan for Sterling buy
By Sara Rosenberg
New York, Feb. 29 – First Advantage Corp. plans to get a new $1.8 billion seven-year covenant-lite term loan to help fund its acquisition of Sterling Check Corp. and retire existing Sterling debt, company officials said in a call on Thursday.
In addition, the company intends to get a $250 million revolving credit facility due 2030 to replace its existing $100 million revolver due July 31, 2026.
BofA Securities Inc., Barclays, BMO Capital Markets, Jefferies Finance LLC and RBC Capital Markets provided the debt commitment.
Under the agreement, Sterling is being purchased for about $1.2 billion in cash and 27.15 million shares of First Advantage common stock. Sterling shareholders will elect to receive either $16.73 in cash or 0.979 shares of First Advantage common stock for each Sterling share. The shareholder election will be subject to proration, resulting in around 72% of Sterling’s shares being exchanged for cash consideration and 28% being exchanged for First Advantage common stock. Sterling shareholders are expected to own about 16% of the combined company after closing, and current First Advantage shareholders will own around 84%.
The combined company is expected to have $1.5 billion in annual revenue and $473 million in adjusted EBITDA, including run-rate synergies.
Pro forma net leverage is estimated to be around 4x, with the long-term goal being to reduce leverage to between 2x and 3x.
Closing is expected in the third quarter, subject to regulatory approvals, clearances and other customary conditions.
First Advantage is an Atlanta-based provider of employment background screening, identity and verification solutions. Sterling is an Independence, Ohio-based provider of background screening and identity services.
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