Mid-Week Comment
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Every week, usually on Wednesday, I share a personal comment with you. It may be a special situation that I am beginning to investigate, an update on one I already told you about in this column, in "Larry Oakley's Opinion" or "Larry Oakley's Weekly Stock Pick", a comment on something that is happening in the economy or in one of the markets, or simply a brief personal opinion.
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Current Mid-Week Comment:
Date Posted: 04/18/01 12:00:00 AM.0
IVG Corp. (OTC BB/IVGG)
I first covered IVGG in my Weekly Stock Pick on 12/9/2000 when it was called iVG Corporation (iVG stood for "Internet Venture Group") & traded as ITVI. I liked it then, & the recent events certainly bear out my good first impression. Check my 12/9/2000 column for background -- you'll find it in the "Previous Weekly Stock Picks" section at the end of the Weekly Stock Pick column.
On 3/9/2001, iVG reincorporated in DE, changed its name to IVG Corp. & on 3/12/2001 changed its symbol to IVGG. The move was to reaffirm that its strategic focus extends beyond the Internet & to complement its efforts to create a single brand for its acquired companies, regardless of the nature of their business.
IVGG is a Houston-based human resource & technology holding company. It acquires, develops, & operates revenue-generating companies -- even huge ones, as is evidenced by its 3/30/2001 acquisition of SES-Corp., Inc. (SES). SES is one of the largest full-service Professional Employer Organizations (PEOs) in the U.S. SES is now a wholly owned subsidiary of IVG Corp. It continues to operate as SES-Corp., Inc.
This is IVGG's first acquisition in one of the fastest growing industries in the country, & represents a significant milestone in the company's core business strategy to consolidate the PEO industry in the U.S.
PEOs are companies that contractually assume & manage human resources, personnel responsibilities, & employer risks by establishing & maintaining an employer relationship with worksite employees. One of the fastest growing industries in the U.S., the PEOs are growing at an annual rate of about 35%. According to industry analysts, gross industry revenues for PEOs increased from $5 billion in 1991 to $25 billion in 2000. Industry observers estimate that PEOs have penetrated only 3% of the U.S. market. In a fragmented industry with more than 2,500 companies providing PEO services, there is a good opportunity for future consolidation.
Other major PEOs include Administaff Inc., Staff Leasing Inc., Barret Business Services Inc., TEAM Mucho Inc., TeamStaff Inc., Automatic Data Processing, Inc. & Kelly Services Inc.
Founded in 1989, SES offers small & medium-sized businesses comprehensive management services for the daily administration of human resources & employer obligations. They include payroll & benefits administration, compliance management, medical & workers' compensation insurance programs, unemployment insurance & claims administration, recruiting & placement services, & training & supervisory development services. Headquartered in Auburn Hills, MI, SES has 10 offices in nine states, with operations in 42 states servicing over 2,700 clients & more than 39,000 worksite employees nationwide.
SES offers IVGG shareholders a dramatic improvement in shareholder value. Based on unaudited financial data, SES recorded revenues of about $979 million in FY 2000, & $210 million in Q1 of 2001. SES books for 2000 are not closed, audited statements are not yet completed, & SES expects to report a minor loss. SES has clearly established itself as a dominant player in the PEO marketplace.
As a result of this acquisition, IVGG anticipates its consolidated revenues will increase from about $350,000 in 2000, to roughly $1.2 billion in 2001.
"We are extremely pleased with the acquisition of SES," said IVGG CEO Elorian Landers. "This exciting development creates the foundation for our expansion into the multi-billion dollar PEO market, & a dynamic growth vehicle that will benefit shareholders well into the future. SES is an organization we have always admired because of its consistent history of growth, asset quality, & market share. The acquisition of SES significantly enhances the value of our portfolio."
"Today marks an important first step in our plans to consolidate the PEO industry," commented SES CEO Dennis Lambka. "The collaborative nature of the deal & the clear strategy established for the future sets the stage for our success. We have already identified several prospective acquisition targets, & anticipate a series of significant announcements over the coming months.
"Through our alliance with IVG Corp., we have also created an exciting new opportunity to improve the services of SES. With IVG Corp., we now have access to the technical expertise that will enable us to carry out our Internet strategy & deploy our staffing & human resource services via a web-enabled environment."
Shareholders of SES will be issued restricted shares equal to 25% of IVGG's outstanding common stock. An additional 8% may be issued in 2002, depending on the EBITDA of SES in 2001. About 85% of the shares initially issued under the transaction will be placed in escrow to secure certain indemnification obligations of SES shareholders. The transaction, structured as a triangular merger, will be accounted for as a purchase & was effective 4/1/2001. Two SES executives will be appointed to IVGG's board.
On 4/5/2001, SES signed a letter of intent to acquire United Staffing of America, Ltd., a privately held PEO in Tampa, FL. It serves businesses in 10 states. The acquisition is expected to close 5/2001.
On 4/12/2001, SES signed a letter of intent to acquire Staff Leasing Corporation. Staff is a regional PEO in Palos Heights, IL. It employs 1,200 workers in 24 states, with the core of its client base in IL, IN, WI, & IA. The acquisition is expected to close 6/2001.
The PEO industry is ripe for consolidation, & IVGG is at the right place at the right time. There are only about 2 million shares in the float, with about 43.4 million total out. The 52-week price range is $1 - $7, & at its present price of $1.25 (close 4/17/2001), this is an undervalued situation I feel you should check out.
Call IR director Richard Twardowski @ 281-295-8400, fax 281-295-8440, e-mail richard@ivgcorp.com, or write 13135 S. Dairy Ashford, Suite 525, Sugar Land, TX 77478. You may also call Anthony Zelen at Mindshare Communications Inc. @ 888-301-6788, fax 604-806-3367, or e-mail ivgg@mindsharecommunications.com
www.ivgcorp.com |
