Complete Business Solutions, Inc. to Merge With c.w. Costello & Assoc., inc. For Approximately $71 Million in Stock
Adds Nearly 750 IT Professionals and Strong Eastern and Midwestern U.S. Client Base
FARMINGTON HILLS, Mich., Jan. 8 /PRNewswire/ -- Complete Business Solutions, Inc. (Nasdaq: CBSL - news), a worldwide information technology (IT) consultant and service provider to large and medium-sized organizations, today announced the signing of a definitive merger agreement with privately held c.w. Costello & Associates, inc. for approximately 1.7 million shares of CBSL common stock, currently valued at approximately $71 million. Completion of the merger is subject to governmental filings, due diligence and formal approval of Costello shareholders. Costello & Associates, which had trailing twelve month revenues of approximately $70 million, is an IT service provider to large and mid-sized corporations. The merger, which will be accounted for as a pooling of interests, is expected to be accretive to CBSL's 1998 earnings per share, excluding merger-related expenses.
''There is minimal overlap between our customers, and the merger with Costello will dramatically strengthen our East Coast base,'' said Raj Vattikuti, Complete Business Solutions' president and chief executive officer. ''Together with our recent merger with Synergy Software, Inc. Costello's Midwest presence makes us a very strong player in the Chicago-area market. There are significant advantages to the merger: Costello's clients will be able to utilize our global delivery advantage, and they can also benefit from our Year 2000 end-to-end services. We'll also benefit by adding Costello's highly regarded IT professionals, adding nearly 750 to our rapidly growing base of more than 2,000 IT professionals worldwide.''
c.w. Costello & Associates, inc., headquartered in Connecticut, has approximately 750 IT professionals located primarily in the Northeast and Midwest. Costello provides a broad range of IT services to a target market emphasizing the financial services, telecommunications, healthcare and other industries. The company was founded in 1986 by Charles W. Costello, who will remain with the company and serve on CBSL's Board of Directors to assure that customers realize the benefits of the merger.
''Costello & Associates' services are primarily time and materials-based, with revenues growing in excess of 60 percent annually since 1995,'' said Tim Manney, CBSL's executive vice president of finance and administration. ''We want to retain their key employees and the Company will provide an attractive financial and equity package to accomplish this objective. Key Costello employees have been offered a bonus to reaffirm their commitment to the combined company. We will recognize an accounting charge in 1997 for these bonuses. In addition, Costello's key employees will be eligible to participate in CBSL's stock option plan and employee stock purchase plans. We believe that essentially all of Costello's senior professionals will remain with the combined company. In addition to the charge related to these commitments, the Company will take an accounting charge related to the conversion from an S corporation to a C corporation and related tax impacts. As a result, on a pro forma basis, we do not expect the acquisition of Costello to add to our combined equity.''
''The clients and people of c.w. Costello are outstanding,'' concluded Vattikuti. ''With the client relationships Costello has -- combined with our global delivery capability -- we will be very strong. We hope to improve Costello's margins by changing the business mix, as we did with our own base over the past year, and by consolidating many back-office functions. We've found a company which will blend well with our culture, and together we will add value for clients, employees and shareholders.''
This release contains forward-looking statements relating to future financial results or business expectations. Business plans may change as circumstances warrant. Actual results may differ materially as a result of factors over which the company has no control and other business risks. Such factors include, but are not limited to: mergers and the ability to integrate acquired businesses on a timely basis, due diligence processes, significant client assignments, recruiting and new business solicitation efforts, client and employee retention, currency exchange rate fluctuations, domestic and foreign government regulations, and general economic conditions. These risk factors and additional information are included in the company's reports on file with the Securities and Exchange Commission.
About Complete Business Solutions, Inc.
CBSL is a worldwide provider of information technology (''IT'') services to large and mid-size organizations. The Company offers its clients a broad range of IT services, from advising clients on strategic technology plans to developing and implementing appropriate IT applications solutions. CBSL offers custom-tailored solutions based on an assessment of each client's needs. The Company's services include: Year 2000 conversion and testing services; large systems applications development and maintenance; reengineering legacy applications to client/server technology; client/server applications development; IT consulting services; packaged software implementation; and contract programming services. For the nine months ended September 30, 1997, CBSL's revenues increased approximately 31 percent to $80.3 million, from $61.5 million for the nine months ended September 30, 1996.
For more information on Complete Business Solutions, Inc., visit the Company's website at www.cbsinc.com or dial 800-PRO-INFO and enter the ticker ''CBSL.'' |
