Terra Nova Acquisition, which raised $33.1 million when it completed its IPO on April 19, 2005, has announced that it is acquiring Clearpoint Business Resources, a "workforce solutions provider."
Terra Nova Acquisition Corporation And ClearPoint Business Resources, Inc. Agree to Business Combination
Wednesday August 9, 9:05 pm ET
CHALFONT, Pa.--(BUSINESS WIRE)--Aug. 9, 2006--ClearPoint Business Resources, Inc. ("ClearPoint"), a privately held workforce management solutions provider, and Terra Nova Acquisition Corporation ("Terra Nova" or the "Continuing Corporation") (OTCBB:TNVA - News), a Specified Purpose Acquisition Corporation ("SPAC") that was established in 2005 by Terra Nova Partners, L.P. with total initial net proceeds of approximately $30 million, jointly announced today that they have entered into a definitive merger agreement pursuant to which ClearPoint will merge with Terra Nova. Upon completion of the merger, the Continuing Corporation will consist of ClearPoint as the operating unit and capital from Terra Nova. Additionally, upon closing the merger, Terra Nova will change its name to ClearPoint Business Resources, Inc. and seek a listing on Nasdaq.
The board of directors of Terra Nova and all common stockholders of ClearPoint unanimously supported the signing of the merger agreement. All common stockholders of ClearPoint, including the CEO and President of ClearPoint (who together own 93% of ClearPoint's outstanding common stock) have agreed to exchange all of their shares of common stock in ClearPoint for common stock in the Continuing Corporation at closing. It is estimated that the ClearPoint stockholders will own approximately 47% of the Continuing Corporation immediately after closing.
About ClearPoint
ClearPoint, based in Chalfont, Pennsylvania, near Philadelphia, is a workforce management solutions provider that was founded in 2001 and currently operates 25 branches across the United States with over 120 employees and over 3,500 field associates. ClearPoint operated under the name Mercer Staffing until it changed its name to ClearPoint earlier this year.
ClearPoint focuses on human resource/staff outsourcing, vendor management services, customized managed service programs, and workforce optimization. It also provides business services including business process outsourcing, support services for the transportation, logistics and staffing industries and benefits solutions and administration. ClearPoint is also known for its project-based staff augmentation service which includes full service project solutions, executive search and permanent placement, contract recruiting services and short and long term hourly based assignments.
For the twelve month period ended June 30, 2006 ClearPoint generated sales of approximately $113 million (unaudited) and operating earnings before interest, taxes, depreciation, amortization and non-recurring items ("Adjusted EBITDA") of approximately $7 million (unaudited). ClearPoint has experienced a compounded annual growth rate ("CAGR") of 275% in sales from its founding in fiscal 2001 to fiscal 2005 and grew Adjusted EBITDA from break even to $5.4 million over that same period of time. ClearPoint was recently recognized in an elite group of 100 companies in its industry with at least $100 million in revenue in the May 2006 issue of Staffing Industry Report, which published its annual list of top staffing and human resource outsourcing companies.
Workforce Management Industry Background
The U.S. Bureau of Labor Statistics, according to its report dated December 7, 2005, projects the workforce management industry to rank first in number of jobs created and third in terms of growth rate over the next decade. The American Staffing Association, in its May 2006 Report, estimated the annual sales of the domestic staffing market to be approximately $82 billion, of which $70 billion is from temporary and contract staffing, with the remaining $12 billion from search and permanent placement. The same report noted that on a year-over-year basis, temporary employment increased by more than 10% in 2005.
According to the management of ClearPoint, the growth in the workforce management industry is being fueled by numerous factors including the following:
-- Growing acceptance of flexible employment structures
-- Improving benefits and salaries of temporary workers
-- Increased trend towards outsourcing
-- Transition from a fixed-cost workforce to a variable-cost workforce
-- The staffing industry is highly fragmented with the top 10 firms controlling 22% of the market and only 100 companies with revenues in excess of $100 million as highlighted in the May 2006 issue of the Staffing Industry Report.
Summary of the Transaction
Under the terms of the merger agreement, ClearPoint's common stockholders will receive 5,997,727 shares of Terra Nova common stock at closing, subject to certain closing adjustments based on levels of funded debt and minimum levels of defined working capital and Adjusted EBITDA.
In addition, ClearPoint stockholders are entitled to receive additional performance payments based on the share price of the Continuing Corporation's common stock after closing. The performance payments are payable in cash and shares of common stock as follows:
Target
Share
Tranche Expiry Date Cash Shares Price
----------------------------------------------------------------------
1 December 31, 2007 $1,075,000 126,471 $8.50
----------------------------------------------------------------------
12 months after Tranche 1
2 Expiry or Achievement $1,075,000 97,727 $11.00
----------------------------------------------------------------------
12 months after Tranche 2
3 Expiry or Achievement $1,075,000 82,692 $13.00
----------------------------------------------------------------------
The performance payments with respect to each tranche become payable if the last reported sale price for the Continuing Corporation's common shares on the market on which it is traded is at least the Target Share Price for that tranche for 45 consecutive trading days in the period prior to the tranche expiry date. The stockholders of ClearPoint, each individually, may request up to the entire amount of each performance payment to be paid in shares of the Continuing Corporation at the Target Share Price for each tranche. However, the company has the right to pay up to the full amount of each tranche of the performance payment in cash.
Current stockholders representing 93% of ClearPoint's common stock, including the two founders, have agreed not to sell any shares of the Continuing Corporation's stock received in the merger before April 18, 2008. All of the shares of Terra Nova issued prior to April 18, 2005 will also be locked-up until April 18, 2008.
The board of directors of the Continuing Corporation will consist of seven members, with three members nominated by ClearPoint, three members nominated by Terra Nova and one member who will be jointly nominated.
Navigant Capital Advisors, LLC acted as a financial advisor to the transaction and will receive a fee upon closing. Terra Nova has received a fairness opinion from Capitalink, L.C. which concluded that the merger consideration is fair, from a financial point of view, to the stockholders of Terra Nova. Blank Rome LLP served as legal counsel to ClearPoint and Graubard Miller served as legal counsel to Terra Nova in the transaction.
Vahan Kololian, Chairman and CEO of Terra Nova, said, "We have found a great company and we are very pleased with this transaction. The principals and founders, Mike Traina, CEO, and Chris Ferguson, President, who jointly own more than 90% of ClearPoint, plus all of ClearPoint's other stockholders, have agreed to take all stock at closing. Approximately half of Terra Nova's cash will be used to pay down debt. However, stockholders are not selling any shares. This is a tremendous vote of confidence on the part of the ClearPoint principals in the future of ClearPoint's business. We are also pleased with the valuation which was negotiated.
"Mike and Chris and the entire management team of ClearPoint have great academic and professional credentials and we are confident they are going to continue to achieve superior growth rates in ClearPoint."
Mike Traina, CEO of ClearPoint, commented that, "We are very excited about the merger and appreciate the confidence Terra Nova has in our team. ClearPoint is well poised to continue to grow rapidly, both organically and through accretive strategic acquisitions. The merger provides us with the growth capital required to achieve our aggressive goals and support current business development opportunities. Our customers will be very pleased with ClearPoint's strengthened ability to meet their expanding requirements for workforce solutions."
Chris Ferguson, President of ClearPoint, added, "The outlook for the workforce management industry is very positive. We expect to see continued growth in the industry and in ClearPoint in particular. We also see ample opportunities for potential accretive acquisitions and look forward to a long and bright future with Terra Nova."
Terms of Closing
The closing of the merger is subject to customary closing conditions, including Terra Nova stockholder approval. In addition, the closing is conditional on holders of no more than 19.99% of the shares of common stock of Terra Nova issued in its IPO in April 2005 voting against the business combination and seeking conversion of their shares into cash.
Terra Nova stockholders are urged to read the proxy statement regarding the proposed transaction when it becomes available; it will contain important information about the merger agreement with ClearPoint. Copies of filings relating to Terra Nova and ClearPoint will be available without charge at the Securities and Exchange Commission's internet site (www.sec.gov), and when filed, will be available from Terra Nova, without charge, by directing a request to Terra Nova Acquisition Corporation, 2 Bloor Street West, Suite 3400, Toronto, Ontario, Canada, M4W 3E2.
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