Breaking News: GEO Group buys private prison company Cornell

In big private prison industry news, the GEO Group is buying a large competitor, Houston-based Cornell Companies, according to a story by Reuters ("UPDATE 2-Geo Group to buy rival Cornell for $374 mln," April 19),

Prison operator Geo Group Inc (GEO.N) agreed to buy rival Cornell Cos (CRN.N) for about $374 million in cash and stock as it expands to meet an increasing demand for private correctional and detention facilities.

The deal, which values Cornell at $24.96 a share, a 35 percent premium to the stock's close Friday, will create the sixth largest adult correctional organization in the United States, Geo's Chief Executive George Zoley said. The enterprise value of the deal is $685 million, including assumption of $300 million of debt, Geo said.

"(The deal) will give us a presence in a number of new states, including Illinois, Pennsylvania, Alaska, Colorado and Ohio," Zoley said on a call with analysts. While private prison operators currently house about 9 percent of the states' and federal government's inmates, growing inmate population and prison overcrowding have led to more than half of new inmates being housed in private prisons in some states.

Budget constraints have seen U.S. states increasingly outsource a part of their corrections systems to private operators like Geo and larger rival Corrections Corp of America (CXW.N).

We'll keep readers updated as details and analysis emerge. 

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