Nashville, Tenn.-based Corrections Corporation of America got a little bigger last week, when the prisons operator purchased privately held Correctional Alternatives for $36 million.
The purchase closed last week; CCA revealed its happening this morning, in a press release that described the deal as an all-cash acquisition.
Correctional Alternatives' business focuses on providing "cost-effective solutions for housing and rehabilitation through community corrections." That means the company manages work furloughs and halfway-house programs for current and former detainees, as well as house arrest programs. Correctional Alternatives performs these services for San Diego County, the Federal Bureau of Prisons, and United States Pretrial Services and Probation. The company also owns one traditional 120-bed prison and leases another, with a capacity of 483. CCA operate 68 facilities with a total design capacity of approximately 92,000 beds in 20 states and the District of Columbia.
CCA notes that its purchase will add about $14 million to its annual revenue stream, and increase pro forma profits by about $0.03 next year -- without diluting such profits this year. The purchase, at 2.6 times annual sales, comes at a premium to the 1.9-times-sales valuation CCA's own shares fetch, and investors are selling the stock off modestly today.
The article Corrections Corp. Locks Up a New Subsidiary originally appeared on Fool.com.Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.