On Assignment to Acquire Creative Circle for $570 Million

CALABASAS, Calif.–([1])–On Assignment, Inc. (NYSE: ASGN), a leading global provider of
diversified professional staffing solutions, announced today that it has
signed a definitive agreement to acquire privately-held Creative Circle,
LLC for $570 million in cash and equity, and up to an additional $30
million based on future operating performance. With the addition of
Creative Circle, On Assignment will be able to provide broader staffing
services that support its clients as they transform their business
models and marketing demands towards digital enterprises. The
acquisition is expected to be immediately accretive to On Assignment’s
GAAP earnings per share and adjusted earnings per share (without any
synergy savings) in 2015.

Creative Circle is one of the largest digital/creative staffing firms in
North America and provides digital, marketing, advertising, and creative
talent to both creative agencies and marketing departments of leading
companies. Creative Circle has achieved a three- year compounded annual
growth rate of 26% since 2011. In 2014, the company had approximately
$226 million in revenues with an EBITDA margin of approximately 21%.
Creative Circle expects to achieve double-digit top line growth in 2015.

“Technology has accelerated digital innovation and the way consumers
access content. As such, our clients are faced with the need to remain
competitive by transforming their business models to effectively respond
to consumer demand for digital information and services on a real time
basis,” said Peter T. Dameris, On Assignment’s President and Chief
Executive Officer. “By working together, we can do more for our clients
to accelerate their transformation to a digital platform by providing
our respective clients with a more complete solution in the technology
and digital/creative space.

“Our two companies share a common goal of putting people to work in
challenging roles and the timing could not be better as the lines
between IT and marketing departments are starting to converge as
consumers demand real time content from any device anywhere in the world.

“On Assignment’s strength in technology staffing combined with Creative
Circle’s expertise in the digital/creative space will allow us to engage
the CMO along with the CIO to provide solutions that meet the increasing
needs of both groups while driving greater demand for our traditional
services.”

Creative Circle will become a division of On Assignment and continue to
operate under the Creative Circle brand name. The current leadership
team will continue to oversee the day-to-day operations of the business.

“On Assignment is one of the more innovative and competitive companies
within the professional staffing space,” said Lawrence Serf, Creative
Circle’s Chief Executive Officer. “Like On Assignment, Creative Circle
provides its clients with the highest quality solutions to staffing
challenges and offers professionals unparalleled employment
opportunities in their chosen field. We are excited to be an important
part of On Assignment’s ongoing growth.”

“On Assignment and Creative Circle share a very similar culture and
vision,” said Dennis Masel, Creative Circle’s Chief Operating Officer.
“As we analyzed how best to continue to grow our company, joining On
Assignment quickly became the logical choice.”

The transaction will expand On Assignment’s consolidated gross and
EBITDA margins. On a pro forma basis, 2014 revenues and EBITDA margin
were $2 billion and 12.4% respectively.

Dameris concluded, “Additionally, this acquisition brings us closer to
achieving our $3 billion target in annual revenues by 2018.”

Transaction Details

Under terms of the definitive agreement, On Assignment will acquire all
of Creative Circle’s equity for consideration of $570 million to be paid
at closing, plus additional consideration of up to $30 million if
certain performance targets for 2015 are achieved. The consideration at
closing is comprised of $540 million in cash and $30 million of common
stock.

In connection with the transaction, On Assignment has obtained a secured
financing commitment for $975 million from Wells Fargo Bank, National
Association. The new credit facility consists of a $100 million
revolving credit facility (undrawn at close) and an $875 million term
loan. The proceeds of the term B loan will be used to finance the cash
portion of the purchase price and refinance existing On Assignment debt.
Upon closing of the transaction, funded debt of the combined company is
expected to total approximately 3.7x estimated pro forma adjusted EBITDA
for the twelve months ended June 30, 2015.

For income tax reporting purposes, the acquisition will be treated as an
asset purchase rather than a stock purchase. Consequently, the Company’s
tax basis in the net assets acquired will equal the purchase
consideration, resulting in an annual cash income tax savings of
approximately $14 million over the next 15 years from the amortization
of intangible assets.

On Assignment expects its increased scale, along with strong revenue and
free cash flow generation, to result in rapid deleveraging, creating
further equity value. In connection with the acquisition, On Assignment
intends to make grants of restricted stock units to certain employees of
Creative Circle as employment inducement awards pursuant to the NYSE
rules.

The acquisition remains subject to regulatory approvals and customary
closing conditions. The transaction is expected to close before the end
of the second quarter.

Financial Estimates for the Second Half of 2015

On Assignment is providing estimates of its operating results from
continuing operations for the second half of 2015, which assume no
significant deterioration in the staffing markets that On Assignment
serves. These estimates do not include any (i) acquisition, integration
or strategic planning expenses or (ii) write-off of deferred loan costs
on the current credit facility that will be replaced by the previously
discussed new credit facility.

  • Revenues of $1.087 billion to $1.103 billion
  • Gross margin of 33.6 percent to 34.0 percent
  • SG&A expense (excludes amortization of intangible assets) of $245.5
    million to $251.0 million (includes $8.4 million in depreciation and
    $10.0 million in equity-based compensation expense)
  • Amortization of intangible assets of $22.5 million
  • Adjusted EBITDA of $138.0 million to $142.1 million
  • Effective tax rate of 40.0 percent
  • Interest expense of $20.6 million (includes $1.6 million of non-cash
    amortization of deferred loan costs)
  • Adjusted income from continuing operations of $80.7 million to $83.2
    million
  • Adjusted income from continuing operations per diluted share of $1.53
    to $1.57
  • Income from continuing operations of $45.9 million to $48.4 million
  • Income from continuing operations per diluted share of $0.87 to $0.92
  • Diluted shares outstanding of 52.8 million

The above estimates assume billable days of 123.6 for the second half of
the year, which are 2.0 days more than the first half of the year and
1.5 fewer days than the second half of 2014. The estimates also assume a
foreign currency exchange rate of 1.08 (US dollar to the EURO).

The mid-point of the revenue range above implies year-over-year pro
forma growth of 8.4 percent (9.2 percent on a constant currency basis).
The revenue estimates assume mid-to-high single-digit growth for Apex
and Oxford, and a year-over-year decline for Life Sciences Europe (flat
on a constant currency basis). The estimates assume Creative Circle will
generate revenues of $138.9 million to $151.7 million in the second half
of 2015 (year-over-year growth of 15.2% to 25.8%).

Legal and Financial Advisors

On Assignment retained Sullivan & Cromwell LLP as legal counsel on the
transaction, Latham & Watkins LLP as legal counsel on the secured
financing commitment and Moelis & Company as exclusive financial
advisor. Creative Circle retained Debevoise & Plimpton LLP as legal
counsel and Wells Fargo Securities as exclusive financial advisor.

Conference Call

On Assignment will hold a conference call with analysts and stockholders
today at 8:30 a.m. EDT. The dial-in number is (888) 254-2817 ((913)
312-0376 for callers outside the United States), and the conference ID
number is 359694. Participants should dial in ten minutes before the
call. A replay of the conference call will be available beginning today
at 11:30 a.m. EDT and ending at midnight EDT on May 25, 2015. The access
number for the replay is (800) 475-6701 ((320) 365-3844 for callers
outside the United States), and the conference ID number 359694.

This call is being webcast by Thomson/CCBN and can be accessed via On
Assignment’s web site at www.onassignment.com[2].
Individual investors can also listen at Thomson/CCBN’s site at www.fulldisclosure.com[3] or
by visiting any of the investor sites in Thomson/CCBN’s Individual
Investor Network. We have also posted on our website a presentation
regarding this transaction.

About Creative Circle

Founded in 2002, Creative Circle is one of the largest creative staffing
agencies in North America, providing digital, marketing, advertising,
and creative talent to a wide range of companies. Creative Circle has
developed a business model that enables it to attract and place
high-level talent on demand. The collaborative, team-based approach
between account executives and recruiters include a diligent screening
process of all candidates to ensure the right fit for each and every
placement.

About On Assignment

On Assignment, Inc. is a leading global provider of in-demand, skilled
professionals in the growing technology and life sciences sectors, where
quality people are the key to success. The Company goes beyond matching
résumés with job descriptions to match people they know into positions
they understand for temporary, contract-to-hire, and direct hire
assignments. Clients recognize On Assignment for its quality candidates,
quick response, and successful assignments. Professionals think of On
Assignment as career-building partners with the depth and breadth of
experience to help them reach their goals.

On Assignment, which is based in Calabasas, California, was founded in
1985 and went public in 1992. The Company has a network of branch
offices throughout the United States, Canada, United
Kingdom, Netherlands, Ireland, Belgium, Spain, and Switzerland. To learn
more, visit http://www.onassignment.com[4].

Reasons for Presentation of Non-GAAP Financial Measures

Statements in this release may include non-GAAP financial measures. Such
information is provided as additional information, not as an alternative
to our consolidated financial statements presented in accordance with
Generally Accepted Accounting Principles in the United States (“GAAP”).
Such measures also are used to determine a portion of the compensation
for some of our executives and employees. We believe the non-GAAP
financial measures provide useful information to management, investors
and prospective investors by excluding certain charges and other amounts
that we believe are not indicative of our core operating results. These
non-GAAP measures are included to provide management, our investors and
prospective investors with an alternative method for assessing our
operating results in a manner that is focused on the performance of our
ongoing operations and to provide a more consistent basis for comparison
between quarters. One of the non-GAAP financial measures presented is
EBITDA (earnings before interest, taxes, depreciation, and amortization
of intangible assets), other terms include Adjusted EBITDA (EBITDA plus
equity-based compensation expense, impairment charges, write-off of loan
costs, and acquisition, integration and strategic planning expenses) and
Non-GAAP income from continuing operations (Income from continuing
operations, plus write-off of loan costs, and acquisition, integration
and strategic planning expenses, net of tax) and Adjusted income from
continuing operations and related per share amounts. These terms might
not be calculated in the same manner as, and thus might not be
comparable to, similarly titled measures reported by other companies.

Safe Harbor

Certain statements made in this news release are “forward-looking
statements” within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, and involve a high degree of risk and
uncertainty. Forward-looking statements include statements regarding the
Company’s anticipated financial and operating performance in 2015, the
expected timing of the closing of the transaction and other statements
regarding the expected performance of On Assignment and of the combined
company. All statements in this release, other than those setting forth
strictly historical information, are forward-looking statements.
Forward-looking statements are not guarantees of future performance, and
actual results might differ materially. In particular, the Company makes
no assurances that the estimates of revenues, gross margin, SG&A,
Adjusted EBITDA, income from continuing operations, adjusted income from
continuing operations, earnings per share or earnings per diluted share
set forth above will be achieved. Factors that could cause or contribute
to such differences include actual demand for our services, our ability
to attract, train and retain qualified staffing consultants, our ability
to remain competitive in obtaining and retaining clients, the
availability of qualified temporary professionals, management of our
growth, continued performance of our enterprise-wide information
systems, our ability to manage our potential or actual litigation
matters, the successful integration of our recently acquired
subsidiaries, the successful implementation of our five-year strategic
plan, and other risks detailed from time to time in our reports filed
with the Securities and Exchange Commission (“SEC”), including our
Annual Report on Form 10-K for the year ended December 31, 2014, as
filed with the SEC on March 2, 2015. We specifically disclaim any
intention or duty to update any forward-looking statements contained in
this news release.

References

  1. ^ (www.businesswire.com)
  2. ^ www.onassignment.com (cts.businesswire.com)
  3. ^ www.fulldisclosure.com (cts.businesswire.com)
  4. ^ http://www.onassignment.com (cts.businesswire.com)

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