As filed with the Securities and Exchange Commission on May 5, 2010

Registration No. 333-      

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

The GEO Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

One Park Place, Suite 700

621 Northwest 53^rd Street

Boca Raton, Florida 33487-8242

(561) 893-0101

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

John J. Bulfin, Esq.

Senior Vice President, General Counsel

and Secretary

The GEO Group, Inc.

One Park Place, Suite 700

621 Northwest 53^rd Street

Boca Raton, Florida 33487-8242

(561) 893-0101

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

 

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective time of this registration statement and the effective time of the merger of GEO Acquisition III, Inc., a Delaware corporation and a wholly owned subsidiary of The GEO Group, Inc. with and into Cornell Companies, Inc., a Delaware corporation, as described in the Agreement and Plan of Merger, dated as of April 18, 2010, as amended, attached as Annex A to the joint proxy statement/prospectus forming part of this registration statement.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

(Do not check if a smaller reporting company)

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  o

 

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  o

 

CALCULATION OF REGISTRATION FEE

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

PRELIMINARY — SUBJECT TO COMPLETION, DATED MAY 5, 2010

 

 

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

 

The boards of directors of The GEO Group, Inc., or GEO, and Cornell Companies, Inc., or Cornell, have each approved a merger agreement which provides for GEO to acquire Cornell. The boards of directors of GEO and Cornell believe that the combination of the two companies will create greater long-term stockholder value than either company could individually achieve on a stand-alone basis.

 

If the merger is completed, Cornell stockholders will be entitled to receive, at their election, either (i) 1.3 shares of common stock of GEO, par value $.01 per share, for each share of Cornell common stock, which we refer to as the stock consideration; or (ii) the right to receive cash consideration equal to the greater of (x) the fair market value of one share of GEO common stock plus $6.00 or (y) the fair market value of 1.3 shares of GEO common stock, which we refer to as the cash consideration. The stock consideration and cash consideration are collectively referred to as the merger consideration. Cornell stockholders desiring to receive a combination of GEO common stock and cash may do so by making a stock election with respect to a portion of their shares and a cash election with respect to their remaining shares. If a Cornell stockholder fails to make an election, the holder will receive the stock consideration. In order to preserve the tax-deferred treatment of the transaction, no more than 20% of the outstanding shares of Cornell common stock may be exchanged for the cash consideration. If cash elections are made with respect to more than 20% of Cornell’s shares, the excess over 20% shall be treated as a stock election and will be exchanged for shares of GEO common stock. Additionally, if cash elections are made such that the aggregate cash consideration would exceed $100.0 million, then GEO may elect, in its sole discretion, to pay such excess amount in shares of GEO common stock or in cash.

 

The combined company will be named The GEO Group, Inc. and the shares of the combined company will continue to be traded on the New York Stock Exchange, or the NYSE, under the symbol “GEO.” GEO shareholders will continue to own their existing shares after the merger. On          , 2010, the closing price per share of GEO common stock as reported by the NYSE was $     . On          , 2010, the closing price per share of Cornell common stock as reported by the NYSE was $     . You are urged to obtain current market quotations for the shares of GEO and Cornell.

 

YOUR VOTE IS IMPORTANT. The merger cannot be completed unless holders of GEO common stock vote to approve the issuance of GEO common stock, which we refer to as the GEO share issuance, in connection with the merger, and Cornell stockholders vote to adopt the merger agreement.

 

The GEO board of directors recommends that GEO shareholders vote “FOR” the GEO share issuance in connection with the merger, “FOR” the amendments to The GEO Group, Inc. 2006 Stock Incentive Plan and “FOR” the adjournment of the GEO special meeting, if necessary, to solicit additional proxies in favor of the foregoing proposals. The Cornell board of directors recommends that Cornell stockholders vote “FOR” the adoption of the merger agreement and “FOR” the adjournment of the Cornell special meeting, if necessary, to solicit additional proxies in favor of the adoption of the merger agreement.

 

GEO and Cornell will each hold a special meeting of their respective shareholders and stockholders to vote on these proposals. Whether or not you plan to attend your company’s special meeting, please take the time to cause your shares to be voted by completing and mailing the enclosed proxy card or submitting your proxy by telephone or through the Internet, using the procedures in the proxy voting instructions included with your proxy card. Even if you return the proxy, you may attend the special meeting and vote your shares in person at the meeting.

 

This joint proxy statement/prospectus describes the proposed merger and related transactions in more detail. GEO and Cornell encourage you to read this entire joint proxy statement/prospectus carefully, including the merger agreement, which is included as Annex A, and the section discussing “Risk Factors” relating to the merger and the combined company beginning on page 18.

 

GEO and Cornell look forward to the successful combination of the two companies.

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger described in this joint proxy statement/prospectus or the GEO common stock to be issued pursuant to the merger, or determined if this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

 

This joint proxy statement/prospectus is dated          , 2010 and, together with the accompanying proxy card, is first being mailed or otherwise delivered to GEO shareholders and Cornell stockholders on or about          , 2010.

 

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES
ADDITIONAL INFORMATION

 

This joint proxy statement/prospectus incorporates by reference important business and financial information about GEO and Cornell from other documents filed with the Securities and Exchange Commission, or the SEC, that are not included in or delivered with this joint proxy statement/prospectus. These SEC filings are available to the public at the website maintained by the SEC at http://www.sec.gov and at the SEC’s public reference room located at 100 F Street, N.E., Room 1024, Washington, DC 20549. This information is available to you without charge upon your written or oral request. For a list of the documents incorporated by reference into this joint proxy statement/prospectus and more information on how you can obtain these filings, see “Where You Can Find More Information” beginning on page 111. You can obtain electronic or hardcopy versions of the documents that are incorporated by reference into this joint proxy statement/prospectus, without charge, from the Investor Relations section of the appropriate company’s website or by requesting them in writing or by telephone, in each case as set forth below:

 

 

IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY          , 2010 IN ORDER TO RECEIVE THEM BEFORE YOUR COMPANY’S SPECIAL MEETING. YOU WILL NOT BE CHARGED FOR ANY OF THE DOCUMENTS YOU REQUEST.

 

SUBMITTING A PROXY ELECTRONICALLY, BY TELEPHONE OR BY MAIL

 

GEO shareholders of record on          , 2010 may submit their proxies as follows:

 

 

Cornell stockholders of record on          , 2010 may submit their proxies as follows:

 

 

If you are a beneficial owner, please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you.

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held On          , 2010

 

Dear GEO Shareholder:

 

The GEO Group, Inc. is pleased to invite you to attend a special meeting of the shareholders of GEO, which will be held on          , 2010 at   a.m., Eastern time, at          .

 

The purpose of the GEO special meeting is to consider and to vote upon the following proposals:

 

 

The GEO board of directors has determined that the GEO share issuance in connection with the merger and the amendments to the 2006 Plan are advisable and in the best interests of GEO and its shareholders and recommends that GEO shareholders vote “FOR” the GEO share issuance in connection with the merger, “FOR” the amendments to the 2006 Plan and “FOR” the adjournment of the GEO special meeting, if necessary, to solicit additional proxies in favor of the foregoing proposals.

 

GEO and Cornell cannot complete the merger unless the GEO share issuance is approved by the affirmative vote of holders of shares of GEO common stock representing a majority of votes cast on the proposal, provided that the total number of votes cast on the proposal must represent a majority of the total number of shares of GEO common stock issued and outstanding on the record date for the GEO special meeting.

 

Your vote is very important. Your failure to vote will make it more difficult to approve the GEO share issuance.

 

The close of business on          , 2010 has been fixed as the record date, which is referred to as the GEO record date. Only holders of record of GEO common stock on the GEO record date are entitled to notice of, and to vote at, the GEO special meeting or any adjournments or postponements of the GEO special meeting. A list of the holders of GEO common stock entitled to vote at the GEO special meeting will be available for examination by any GEO shareholder, for any purpose germane to the GEO special meeting, at GEO’s principal executive offices at One Park Place, Suite 700, 621 Northwest 53rd Street, Boca Raton, Florida 33487, for ten days before the GEO special meeting, during normal business hours, and at the time and place of the GEO special meeting as required by law.

 

GEO directs your attention to the joint proxy statement/prospectus accompanying this notice for a more complete statement regarding the matters proposed to be acted upon at the GEO special meeting. You are encouraged to read the entire joint proxy statement/prospectus carefully, including the merger agreement, which is included as Annex A to the joint proxy statement/prospectus, and the section discussing “Risk Factors” beginning on page 18.

SO THAT YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU ATTEND THE GEO SPECIAL MEETING, PLEASE SUBMIT A PROXY AS SOON AS POSSIBLE BY MAIL, BY TELEPHONE OR THROUGH THE INTERNET. INSTRUCTIONS ON THESE DIFFERENT WAYS TO SUBMIT YOUR PROXY ARE FOUND ON THE ENCLOSED PROXY FORM. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE GEO SPECIAL MEETING. YOUR VOTE IS IMPORTANT, SO PLEASE VOTE YOUR SHARES AS SOON AS POSSIBLE.

 

By Order of the Board of Directors,

 

George C. Zoley

Chairman of the Board of Directors and

Chief Executive Officer

 

          , 2010

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held On          , 2010

 

Dear Cornell Stockholder:

 

Cornell Companies, Inc. is pleased to invite you to attend a special meeting of the stockholders of Cornell which will be held on          , 2010 at   a.m., Central time, at          .

 

The purpose of the Cornell special meeting is to consider and to vote upon the following proposals:

 

 

The Cornell board of directors has determined that the merger agreement and the transactions contemplated by it, including the merger, are advisable and in the best interests of Cornell and its stockholders and recommends that Cornell stockholders vote “FOR” the adoption of the merger agreement and “FOR” the adjournment of the Cornell special meeting, if necessary, to solicit additional proxies in favor of the foregoing proposal.

 

GEO and Cornell cannot complete the merger unless the proposal to adopt the merger agreement is approved by holders of a majority of the total number of shares of Cornell common stock issued and outstanding on the record date for the Cornell special meeting.

 

Your vote is very important. Abstentions and broker non-votes will have the same effect as a vote against approval of the merger agreement.

 

The close of business on          , 2010 has been fixed as the record date, which is referred to as the Cornell record date. Only holders of record of Cornell common stock on the Cornell record date are entitled to notice of, and to vote at, the Cornell special meeting or any adjournments or postponements of the Cornell special meeting. A list of Cornell stockholders entitled to vote at the Cornell special meeting will be available for examination by any Cornell stockholder for any purpose germane to the Cornell special meeting, at Cornell’s principal executive offices at 1700 West Loop South, Suite 1500, Houston, Texas 77027, for ten days before the Cornell special meeting, during normal business hours, and at the time and place of the Cornell special meeting as required by law.

 

Cornell directs your attention to the joint proxy statement/prospectus accompanying this notice for more detailed information regarding the matters proposed to be acted upon at the Cornell special meeting. You are encouraged to read the entire joint proxy statement/prospectus carefully, including the merger agreement, which is included as Annex A to the joint proxy statement/prospectus, and the section discussing “Risk Factors” beginning on page 18.

SO THAT YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU ATTEND THE CORNELL SPECIAL MEETING, PLEASE SUBMIT A PROXY AS SOON AS POSSIBLE BY MAIL, BY TELEPHONE OR THROUGH THE INTERNET. INSTRUCTIONS ON THESE DIFFERENT WAYS TO SUBMIT YOUR PROXY ARE FOUND ON THE ENCLOSED PROXY FORM. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE CORNELL SPECIAL MEETING. YOUR VOTE IS IMPORTANT, SO PLEASE VOTE YOUR SHARES AS SOON AS POSSIBLE.

 

By Order of the Board of Directors,

 

James E. Hyman

Chairman of the Board, Chief Executive

Officer and President

 

          , 2010

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

Cornell Companies, Inc.
1700 West Loop South, Suite 1500
Houston, Texas 77027
Attention: Corporate Secretary

 

 

[Proxy Solicitor]

[Address]

 

The GEO Group, Inc.
One Park Place, Suite 700
621 NW 53rd Street
Boca Raton, Florida 33487
Attention: Corporate Secretary

 

 

 

[Proxy Solicitor]
[Name]

 

 

SUMMARY

 

The Companies

 

The Merger

										Implied
										Value
		GEO				Cornell				Cornell
		Common				Common				Common
		Stock				Stock				Stock
April 16, 2010		$	19.16			$	18.47			$	24.91
, 2010		$				$				$

	•	“FOR” the GEO share issuance in connection with the merger;
	•	“FOR” the amendments to the 2006 Plan; and
	•	“FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the foregoing proposals.

	•	“FOR” the adoption of the merger agreement; and
	•	“FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the foregoing proposal.

	•	receipt of the GEO shareholder approval in accordance with Florida law and Cornell stockholder approval in accordance with Delaware law;
	•	the absence of any law, injunction, judgment or ruling prohibiting consummation of the merger or making the consummation of the merger illegal;
	•	the effectiveness of, and the absence of any stop order with respect to, the registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part;
	•	the approval for listing on the NYSE, subject to official notice of issuance, of the shares of GEO common stock issuable in connection with the merger;
	•	the expiration or termination of the waiting period (and any extension thereof) applicable to the merger under the HSR Act;

	•	the representations and warranties of each party to the merger agreement being true and correct in all material respects, and true and correct (without giving effect to any qualifications) except where such failures to be true and correct would not reasonably be expected to have a material adverse effect in the case of certain representations and warranties, and each party to the merger agreement having performed in all material respects all of its obligations under the merger agreement; and
	•	the merger agreement will not have been terminated.

	•	the Cornell employee stock purchase plan must have been terminated as of the effective time and each option or right to purchase Cornell common stock thereunder will have been exercised or deemed to have been exercised and converted into the right to receive the stock consideration or the cash consideration;
	•	no events, occurrences or developments have occurred since the Cornell Balance Sheet Date (as defined in the merger agreement) and are continuing that have had or would reasonably be expected, to have individually or in the aggregate, a material adverse effect on Cornell;
	•	certain specified third-party consents must have been obtained;
	•	each non-employee director of Cornell and, if requested in writing by GEO, of each subsidiary of Cornell, in each case must have resigned or been removed in his or her capacity as a director, effective as of, or prior to, the closing date;
	•	GEO must have received the opinion of its own counsel that the merger will be treated for Federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code; and
	•	Cornell must not permit its total issued and outstanding shares of common stock to exceed 16,000,000 shares after giving effect to all shares of Cornell common stock issued and outstanding and all shares of Cornell common stock issuable upon the exercise of any option, warrant, employee stock purchase right or other right or issuable upon the conversion or exchange of any security convertible into or exchangeable for shares of Cornell common stock.

	•	no events, occurrences or developments have occurred since the GEO Balance Sheet Date (as defined in the merger agreement) and are continuing that have had or would reasonably be expected, to have individually or in the aggregate, a material adverse effect on GEO; and
	•	Cornell must have received the opinion of its own counsel that the merger will be treated for Federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code.

	•	the merger has not been consummated on or before February 15, 2011;
	•	any governmental authority issues an order, decree or ruling, enacts a law or takes any other action (that is final and nonappealable) having the effect of making the merger illegal or otherwise prohibiting the completion of the merger;
	•	the GEO shareholders or Cornell stockholders fail to give the necessary approvals at their special meetings or any adjournments or postponements thereof; or

	•	GEO or Cornell have breached in any material respect any of their representations or warranties or failed to perform in any material respect any of their covenants set forth in the merger agreement, and such breach or failure to perform (i) would prevent such party from satisfying the closing conditions of the merger agreement relating to the accuracy of its representations and warranties or compliance with covenants, and (ii) cannot be cured or has not been cured within 30 days from the date of notice to such party.

	•	the Cornell board of directors has changed its recommendation to the Cornell stockholders that they adopt the merger agreement or it has approved or entered into any acquisition agreement other than in compliance with the merger agreement;
	•	a burdensome condition has been imposed in connection with the grant of the antitrust approval relating to the merger which would prohibit or materially restrict the ownership or operation of any material business or assets of GEO and its subsidiaries or Cornell and its subsidiaries or cause GEO and its subsidiaries or Cornell and its subsidiaries to agree to or to dispose of or hold separate all or a material portion of the business and assets of GEO and its subsidiaries or Cornell and its subsidiaries; or
	•	Cornell fails to fulfill the condition regarding the maximum number of issued and outstanding shares of Cornell common stock, and such failure either cannot be cured or has not been cured within 30 days from the date of notice to Cornell.

	•	if the merger agreement is terminated by Cornell or GEO following the failure by GEO to obtain the GEO shareholder approval; or
	•	if the merger agreement is terminated by Cornell if GEO or GEO Acquisition III, Inc. have breached in any material respect any of their representations or warranties or failed to perform in any material respect any of their covenants set forth in the merger agreement, and such breach or failure to perform (i) would prevent GEO or GEO Acquisition III from satisfying the closing conditions of the merger agreement relating to the accuracy of the representations and warranties or performance of its obligations required under the merger agreement, and (ii) cannot be cured or has not been cured within 30 days from the date of notice to GEO.

	•	if the merger agreement is terminated by GEO or Cornell following the failure by Cornell to obtain the Cornell stockholder approval; or
	•	if the merger agreement is terminated by GEO because Cornell has breached in any material respect any of its representations or warranties or failed to perform in any material respect any of its covenants set forth in the merger agreement, and such breach or failure to perform (i) would prevent Cornell from satisfying the closing conditions of the merger agreement relating to the accuracy of the representations and warranties or performance of its obligations required under the merger agreement, and (ii) cannot be cured or has not been cured within 30 days from the date of notice to Cornell.

	•	if the merger agreement is terminated by GEO pursuant to the Cornell board of directors having changed its recommendation to the Cornell stockholders that they adopt the merger agreement or the Cornell board of directors approving or entering into any acquisition agreement other than in compliance with the merger agreement; or
	•	if the merger agreement is terminated by Cornell pursuant to Cornell, in compliance with the terms of the merger agreement, having entered into a definitive acquisition agreement to effect a proposal that the Cornell board of directors determines in good faith to be more favorable to Cornell stockholders and Cornell simultaneously pays the termination fee and the GEO-related fees and expenses within the time frame provided.

	•	if the merger agreement is terminated by GEO or Cornell because the merger has not been consummated on or before February 15, 2011;
	•	if the merger agreement is terminated by GEO or Cornell because Cornell stockholders fail to give the necessary approvals at their special meetings; or
	•	if the merger agreement is terminated by GEO because Cornell has breached in any material respect any of its representations or warranties or failed to perform in any material respect any of its covenants or agreements set forth in the merger agreement, and such breach or failure to perform (i) would prevent Cornell from satisfying the closing conditions of the merger agreement relating to the accuracy of the representations and warranties or performance of its obligations under the merger agreement, and (ii) cannot be cured or has not been cured within 30 days from the date of notice to Cornell.

 

Special Meetings of GEO Shareholders and Cornell Stockholders

	•	approve the issuance of shares of GEO common stock in connection with the merger;
	•	approve the amendments to the 2006 Plan; and
	•	approve an adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the foregoing proposals.

	•	The GEO share issuance requires the affirmative vote of holders of shares of GEO common stock representing a majority of votes cast on the proposal, provided that the total number of votes cast on the proposal must represent a majority of the total number of shares of GEO common stock issued and outstanding on the record date for the GEO special meeting;

	•	Approval of the amendments to the 2006 Plan requires the affirmative vote of holders of shares of GEO common stock representing a majority of votes cast on the proposal, provided that the total number of votes cast on the proposal must represent a majority of the total number of shares of GEO common stock issued and outstanding on the record date for the GEO special meeting; and
	•	Approval of an adjournment of the GEO special meeting, if necessary, to solicit additional proxies in favor of the GEO share issuance and the amendments to the 2006 Plan requires the affirmative vote of holders of shares of GEO common stock represented and entitled to vote at the special meeting to exceed the number of votes cast opposing the approval of an adjournment.

	•	adopt the merger agreement, pursuant to which Cornell will become a wholly owned subsidiary of GEO; and
	•	approve an adjournment of the Cornell special meeting, if necessary, to solicit additional proxies in favor of the foregoing proposal.

	•	the adoption of the merger agreement requires the approval of holders of a majority of the total number of shares of Cornell common stock issued and outstanding on the record date for the Cornell special meeting; and
	•	the approval of an adjournment of the Cornell special meeting, if necessary, to solicit additional proxies in favor of the adoption of the merger agreement, requires the affirmative vote of holders of shares of Cornell common stock representing a majority of the total number of shares of Cornell common stock present, in person or by proxy at the Cornell special meeting, and entitled to vote on the proposal.

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF GEO

		Fiscal Years Ended
		2009				2008				2007				2006(1)				2005(2)
		(In thousands, except per share data)
Statement of Operations Data:
Revenues		$	1,141,090			$	1,043,006			$	976,299			$	818,439			$	612,900
Operating costs and expenses
Operating expenses			897,356				822,659				788,503				680,088				541,173
Depreciation and amortization			39,306				37,406				33,218				21,682				15,876
General and administrative expenses			69,240				69,151				64,492				56,268				48,958
Operating income			135,188				113,790				90,086				60,401				6,893
Interest income			4,943				7,045				8,746				10,687				9,154
Interest expense			(28,518	)			(30,202	)			(36,051	)			(28,231	)			(23,016	)
Loss on extinguishment of debt			(6,839	)			—				(4,794	)			(1,295	)			(1,360	)
Income before income taxes, equity in earnings of affiliates, and discontinued operations			104,774				90,633				57,987				41,562				(8,329	)
Provision for income taxes			41,991				33,803				22,049				15,138				(12,129	)
Equity in earnings of affiliates, net of income tax provision (benefit)			3,517				4,623				2,151				1,576				2,079
Income from continuing operations			66,300				61,453				38,089				28,000				5,879
Income (loss) from discontinued operations, net of tax provision (benefit)			(346	)			(2,551	)			3,756				2,031				1,127
Net income		$	65,954			$	58,902			$	41,845			$	30,031			$	7,006
Weighted average common shares outstanding:
Basic			50,879				50,539				47,727				34,442				28,740
Diluted			51,922				51,830				49,192				35,744				30,030
Earnings (loss) per common share:
Basic:
Income from continuing operations		$	1.30			$	1.22			$	0.80			$	0.81			$	0.20
Income (loss) from discontinued operations			—				(0.05	)			0.08				0.06				0.04
Net income per share — basic		$	1.30			$	1.17			$	0.88			$	0.87			$	0.24
Diluted:
Income from continuing operations		$	1.28			$	1.19			$	0.77			$	0.78			$	0.19
Income (loss) from discontinued operations			(0.01	)			(0.05	)			0.08				0.06				0.04
Net income per share — diluted		$	1.27			$	1.14			$	0.85			$	0.84			$	0.23
Balance Sheet Data:
Cash and cash equivalents		$	33,856			$	31,655			$	44,403			$	111,520			$	57,094
Restricted cash			34,068				32,697				34,107				33,651				26,366
Accounts receivable, net			200,756				199,665				164,773				162,867				127,612
Property, plant and equipment, net			998,560				878,616				783,363				287,374				282,236
Total assets			1,447,818				1,288,621				1,192,634				743,453				639,511
Total debt			584,694				512,133				463,930				305,957				376,046
Total shareholders’ equity			665,098				579,597				529,347				249,907				108,594

(1)		The Selected Historical Consolidated Balance Sheet Data for the fiscal year ended December 31, 2006 does not include the impact of certain discontinued operations which occurred in the fiscal year ended December 28, 2008. The Selected Historical Consolidated Statement of Operations Data for this fiscal year includes a

		reclassification for income related to GEO’s non-controlling interest which was reclassified to operating income for consistent presentation to later years presented.
(2)		The Selected Historical Consolidated Statement of Operations Data and Balance Sheet Data for the fiscal year ended January 1, 2006 does not include the impact of certain discontinued operations which occurred in the fiscal year ended December 28, 2008. The Selected Historical Consolidated Statement of Operations Data for this fiscal year includes a reclassification for income related to GEO’s non-controlling interest which was reclassified to operating income for consistent presentation to later years presented.

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CORNELL

		Years Ended December 31,
		2009				2008				2007				2006				2005
		(In thousands, except per share data)
Statement of Operations Data:
Revenues		$	412,377			$	386,724			$	360,604			$	360,855			$	310,775
Operating expenses, excluding depreciation and amortization			295,645				280,630				274,110				275,395				238,305
Pre-opening and start-up expenses			4,086				—				—				2,657				9,017
Depreciation and amortization			18,833				17,943				15,986				16,285				15,200
General and administrative expenses			24,112				25,954				25,499				21,720				20,387
Income from operations			69,701				62,197				45,009				44,798				27,866
Interest expense			25,830				26,946				26,215				26,130				24,041
Interest income			(657	)			(2,988	)			(1,951	)			(3,060	)			(2,318	)
Income from continuing operations before provision for income taxes			44,528				38,239				20,745				21,728				6,143
Provision for income taxes			17,955				15,603				8,835				9,148				2,215
Income from continuing operations			26,573				22,636				11,910				12,580				3,928
Discontinued operations, net of tax benefit of $381 and $1,950 in 2006 and 2005, respectively			—				—				—				(707	)			(3,622	)
Net income			26,573				22,636				11,910				11,873				306
Non-controlling interest(1)			1,947				445				—				—				—
Income available to Cornell Companies, Inc.		$	24,626			$	22,191			$	11,910			$	11,873			$	306
Earnings per share attributable to Cornell Companies, Inc. stockholders:
Basic:		$	1.65			$	1.51			$	0.82			$	0.85			$	0.02
Diluted:		$	1.64			$	1.49			$	0.82			$	0.84			$	0.02
Number of shares used in per share computation:
Basic:			14,881				14,701				14,452				14,003				13,692
Diluted:			14,986				14,847				14,611				14,072				13,787
Balance Sheet Data:
Cash and cash equivalents		$	27,724			$	14,613			$	3,028			$	18,529			$	13,723
Property and equipment, net			455,523				450,354				383,952				319,064				323,861
Total assets			650,565				636,921				562,287				523,533				510,628
Total debt			303,254				320,482				286,709				265,981				276,360
Stockholders’ equity			258,738				228,167				200,449				181,564				165,461

(1)		Non-controlling interest in consolidated special purpose entities represents equity that other investors have contributed to the special purpose entity Municipal Corrections Finance, L.P., or MCF. Non-controlling interest is adjusted for income and losses allocable to the other owners of the special purpose entity.

 

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL DATA

		For the Year Ended
		January 3, 2010
		(In thousands, except
		per share data)
RESULTS OF CONTINUING OPERATIONS:
Revenues		$					1,551,759
Operating income							197,037
Income from continuing operations attributable to the combined Company							86,156
Income from continuing operations per common share attributable to the combined Company
Basic:		$					1.29
Diluted:							1.27
Weighted Average Shares Outstanding:
Basic:							66,683
Diluted:							67,726

		As of
		January 3, 2010
		(In thousands)
BALANCE SHEET DATA:
Current assets		$					416,159
Current liabilities							279,733
Total assets							2,300,138
Total debt							973,249
Total liabilities							1,310,415
Total shareholders’ equity							989,723

 

COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

		For the Year Ended January 3, 2010
GEO Historical Per Share Data:
Income from continuing operations per share
Basic		$					1.30
Diluted							1.28
Cash dividends per share							—
Book value per diluted share							12.81
GEO Unaudited Pro Forma Combined Per Share Data:
Income from continuing operations attributable to the combined Company per share
Basic		$					1.29
Diluted							1.27
Cash dividends per share							—
Book value per diluted share							14.61

		For the Year
		Ended December 31,
		2009
Cornell Historical Per Share Data:
Income from continuing operations per share
Basic		$					1.65
Diluted							1.64
Cash dividends per share							—
Book value per diluted share							17.27

 

COMPARATIVE PER SHARE MARKET PRICE AND SHARE INFORMATION

		GEO Common Stock								Cornell Common Stock
		Market Price ($)								Market Price ($)
		High				Low				High				Low
2008
First Quarter			28.71				22.01				23.01				16.15
Second Quarter			29.48				22.10				24.50				20.16
Third Quarter			26.96				18.00				28.32				22.00
Fourth Quarter			21.62				12.65				26.00				16.50
2009
First Quarter			19.54				10.98				18.45				13.73
Second Quarter			18.66				12.83				20.40				15.86
Third Quarter			20.78				16.82				22.64				15.74
Fourth Quarter			22.78				19.35				23.92				20.16
2010
First Quarter			23.18				17.91				25.13				18.06
Second Quarter (through          , 2010)

		GEO				Cornell				Implied Value
		Common				Common				of Cornell
		Stock				Stock				Common Stock
April 16, 2010		$	19.16			$	18.47			$	24.91
, 2010

 

Stock Repurchase Program

 

On February 22, 2010, GEO announced that its Board of Directors approved a stock repurchase program of up to $80.0 million of its common stock effective through March 31, 2011. The stock repurchase program is intended to be implemented through purchases made from time to time in the open market or in privately negotiated transactions, in accordance with applicable rules and requirements of the Securities and Exchange Commission. The program also may include repurchases from time to time from executive officers or directors of vested restricted stock and/or vested stock options. The stock repurchase program does not obligate GEO to purchase any specific amount of its common stock and may be suspended or extended at any time at GEO’s discretion. GEO does not intend to enter into any privately negotiated transactions to repurchase any shares of GEO stock issued in the merger, nor does it intend to target shares of GEO stock issued in the merger for repurchase in the open market. As of April 16, 2010, GEO has repurchased 2,767,881 shares of its common stock for $53.8 million.

 

Contract Terminations

 

On April 14, 2010, GEO announced the results of the rebids of two of its managed-only contracts in the State of Florida. The State of Florida has issued a Notice of Intent to Award contracts for the 1,884-bed Graceville Correctional Facility located in Graceville, Florida and the 985-bed Moore Haven Correctional Facility located in Moore Haven, Florida to another operator effective August 1, 2010. GEO does not expect that the termination of these contracts will have a material adverse impact, individually or in the aggregate, on its financial condition, results of operations or cash flows.

 

Litigation Relating to the Merger

 

On April 27, 2010, a putative stockholder class action was filed in the District Court for Harris County, Texas by Todd Shelby against Cornell, members of the Cornell board of directors, individually, and GEO. The complaint alleges, among other things, that the Cornell directors, aided and abetted by Cornell and GEO, breached their fiduciary duties in connection with the merger. Among other things, the complaint seeks to enjoin Cornell, its directors and GEO from completing the merger and seeks a constructive trust over any benefits improperly received by the defendants as a result of their alleged wrongful conduct.

 

In addition to the other information included and incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” below, you should carefully consider the following risk factors before deciding whether to vote for the GEO share issuance and the amendments to the 2006 Plan, in the case of GEO shareholders, or for adoption of the merger agreement, in the case of Cornell stockholders. In addition to the risk factors set forth below, you should read and consider other risk factors specific to each of the GEO and Cornell businesses that will also affect the combined company after the merger, which are described in Part I, Item 1A of GEO’s Annual Report on Form 10-K for the year ended January 3, 2010 and Cornell’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2009, each of which has been filed by GEO or Cornell, as applicable, with the SEC and any subsequent periodic reports all of which are incorporated by reference into this joint proxy statement/prospectus. If any of the risks described below or in the periodic reports incorporated by reference into this joint proxy statement/prospectus actually occurs, the businesses, financial condition, results of operations, prospects or stock prices of GEO, Cornell or the combined company could be materially adversely affected. See “Where You Can Find More Information,” beginning on page 111.

 

Cornell’s stockholders will receive, subject to certain conditions, either cash consideration or a fixed ratio of 1.3 shares of GEO common stock for each share of Cornell common stock regardless of any changes in the market value of Cornell common stock or GEO common stock before the completion of the merger.

 

Upon completion of the merger, subject to certain conditions, Cornell stockholders will receive either cash consideration or a fixed ratio of 1.3 shares of GEO common stock for each share of Cornell common stock they hold. There will be no adjustment to the exchange ratio (except for adjustments to reflect the effect of any stock split, reverse stock split, stock dividend, recapitalization, reclassification or other similar transaction with respect to Cornell common stock), and the parties do not have a right to terminate the merger agreement based upon changes in the market price of either GEO common stock or Cornell common stock. Accordingly, the dollar value of GEO common stock that Cornell’s stockholders will receive upon completion of the merger will depend upon the market value of GEO common stock at the time of completion of the merger, which may be different from, and lower than, the closing price of GEO common stock on the last full trading day preceding public announcement that GEO and Cornell entered into the merger agreement, the last full trading day prior to the date of this joint proxy statement/prospectus or the date of the Cornell stockholder meetings. The opinions received from GEO’s and Cornell’s respective financial advisors were based on market and other conditions as of the dates of such opinions and neither GEO nor Cornell intends to request updated opinions from such financial advisors prior to completion of the merger. Moreover, completion of the merger may occur some time after the requisite stockholder approvals have been obtained. The market values of GEO common stock and Cornell common stock have varied since GEO and Cornell entered into the merger agreement and will continue to vary in the future due to changes in the business, operations or prospects of GEO and Cornell, market assessments of the merger, regulatory considerations, market and economic considerations, and other factors both within and beyond the control of GEO and Cornell.

 

There can be no assurance that the merger will be consummated. The announcement and pendency of the merger, or the failure of the merger to be consummated, could have an adverse effect on GEO’s or Cornell’s stock price, business, financial condition, results of operations or prospects.

 

The merger is subject to a number of conditions to closing, including (i) the approval of the issuance of shares of GEO common stock in accordance with the terms of the merger agreement, (ii) the adoption of the merger agreement by the Cornell stockholders, (iii) the expiration or termination of the waiting period (and any extension thereof) or the resolution of any litigation instituted applicable to the merger under the HSR Act or any other applicable federal or state statute or regulation, (iv) no temporary restraining order, preliminary or permanent injunction or other order shall have been issued (and remain in effect) by a court or other governmental entity having the effect of making the merger illegal or otherwise prohibiting the consummation of the merger, (v) the approval for listing on the NYSE of the shares of GEO common stock issuable in connection with the merger and (vi) the

receipt of certain third party contractual approvals that are required as a result of the merger. See “The Merger Agreement — Conditions to Completion of the Merger,” beginning on page 77.

 

If the shareholders of GEO fail to approve the GEO share issuance or if Cornell stockholders fail to adopt the merger agreement, GEO and Cornell will not be able to complete the merger. Additionally, if the other closing conditions are not met or waived, the companies will not be able to complete the merger. As a result, there can be no assurance that the merger will be completed in a timely manner or at all.

 

Further, the announcement and pendency of the merger could disrupt GEO’s and Cornell’s businesses, in any of the following ways, among others:

 

 

GEO and Cornell may face additional challenges in competing for new business and retaining or renewing business. These disruptions could be exacerbated by a delay in the completion of the merger or termination of the merger agreement.

 

For the foregoing reasons, there can be no assurance that the announcement and pendency of the merger, or the failure of the merger to be consummated, will not have an adverse effect on GEO’s or Cornell’s stock price, business, financial condition, results of operations or prospects.

 

There can be no assurance that GEO will be able to secure the debt financing required in connection with the merger.

 

GEO’s obligation to complete the merger is not conditioned on receipt of any financing. However, GEO needs approximately $300.0 million to fund the cash component of the merger consideration, the redemption of Cornell’s 10.75% senior notes, the refinancing of Cornell’s credit facility and the payment of transaction fees and expenses. GEO intends to fund the foregoing utilizing a combination of existing cash and one or more draws upon GEO’s senior credit facility. BNP Paribas has provided a commitment to extend $150.0 million of additional financing under the accordion feature of GEO’s existing senior credit facility. GEO may choose to draw upon its existing senior credit facility and the $150.0 million of committed financing or it may choose to pursue alternate financing sources, including debt financing or accessing the capital markets. GEO is currently in compliance with its debt covenants; however, GEO cannot guarantee that it will continue to be in compliance with all necessary conditions in order to draw upon its existing senior credit facility or the $150.0 million of committed financing, or that it will be able to secure alternative financing on terms as favorable as its current debt financing arrangements, on commercially acceptable terms, or at all. If GEO is unable to access its current sources of debt financing or is unable to use its available cash and secure any alternative financing in order to fund the payments it is obligated to make in connection with the merger, GEO will be in breach of the merger agreement.

 

The merger agreement limits Cornell’s ability to pursue an alternative acquisition proposal and requires Cornell to pay a termination fee of $12 million, plus expenses, if it does.

 

The merger agreement prohibits Cornell from soliciting, initiating or encouraging alternative merger or acquisition proposals with any third party. The merger agreement also provides for the payment by Cornell to GEO of a termination fee of $12 million, plus up to $2 million in fees and expenses, if the merger agreement is terminated in certain circumstances in connection with a competing acquisition proposal for Cornell or the withdrawal by the board of directors of Cornell of its recommendation that the Cornell stockholders vote in favor of the proposals

required to consummate the merger, as the case may be. See “The Merger Agreement — Reimbursement of Fees and Expenses; Termination Fees,” beginning on page 79.

 

There may be a long delay between GEO and Cornell each receiving the necessary shareholder and stockholder approvals for the merger and the closing of the transaction, during which time Cornell will lose the ability to consider and pursue alternative acquisition proposals, which might otherwise be superior to the merger.

 

Following the GEO shareholder and Cornell stockholder approvals, the merger agreement prohibits Cornell from taking any actions to review, consider or recommend any alternative acquisition proposals, including those that could be superior to Cornell’s stockholders, respectively, when compared to the merger. Given that there could be a delay between stockholder approval and closing, the time during which Cornell could be prevented from reviewing, considering or recommending such proposals could be significant.

 

Cornell stockholders electing cash consideration cannot be certain that they will receive cash consideration.

 

Under the terms of the merger agreement, no more than 20% of the shares of Cornell common stock are permitted to be exchanged for cash. If cash elections are made with respect to more than 20% of the shares of Cornell common stock outstanding immediately before the effective time of the merger, the excess over 20% shall be treated as a stock election. Additionally, if the Cornell stockholders electing cash consideration in the aggregate would require GEO to pay cash consideration in excess of $100.0 million, GEO, in its sole discretion, may pay such excess amount in either cash consideration or stock consideration. Accordingly, if a Cornell stockholder elects cash consideration, the holder may receive a portion of the merger consideration in stock, which could result in a different result than that anticipated by such stockholder and may result in tax consequences that differ from those that would have resulted from the merger if the Cornell stockholder had only received cash consideration.

 

Certain directors and executive officers of GEO and Cornell may have interests that may be different from, or in addition to, interests of GEO and Cornell stockholders generally.

 

Some of the directors of GEO and Cornell who recommend that GEO shareholders vote in favor of the GEO issuance and Cornell stockholders vote in favor of adopting the merger agreement, and the executive officers of GEO and Cornell who provided information to the GEO and Cornell board of directors relating to the merger, have employment, indemnification and change in control benefit arrangements, rights to acceleration of equity-based awards and other benefits on a change in control of Cornell, and rights to ongoing indemnification and insurance that may provide them with interests in the merger. The receipt of compensation or other benefits, including the rights to acceleration of equity-based awards by GEO’s or Cornell’s executive officers in connection with the merger, may make it more difficult for the combined company to retain their services after the merger, or require the combined company to expend additional sums to continue to retain their services. Stockholders of both companies should be aware of these interests when considering the GEO and Cornell board of directors’ recommendations that they vote in favor of the adoption of the merger agreement, or the GEO share issuance, as the case may be. See “The Merger — Interests of GEO Executive Officers and Directors in the Merger” beginning on page 45. See “The Merger — Interests of Cornell Directors and Executive Officers in the Merger That are Different Than Yours” beginning on page 54.

 

Estimates as to the future value of the combined company are inherently uncertain. You should not rely on such estimates without considering all of the information contained in this joint proxy statement/prospectus.

 

Any estimates as to the future value of the combined company, including estimates regarding the price at which the common stock of the combined company will trade following the merger, are inherently uncertain. The future value of the combined company will depend upon, among other factors, the combined company’s ability to achieve projected revenue and earnings expectations and to realize the anticipated synergies described in this joint proxy statement/prospectus, all of which are subject to the risks and uncertainties described in this joint proxy statement/prospectus, including these risk factors. Accordingly, you should not rely upon any estimates as to the future value

of the combined company, or the price at which the common stock of the combined company will trade following the merger, whether made before or after the date of this joint proxy statement/prospectus by GEO’s or Cornell’s respective management or affiliates or others, without considering all of the information contained in this joint proxy statement/prospectus.

 

A lawsuit has been filed against Cornell, members of the Cornell board of directors and GEO challenging the merger, and an unfavorable judgment or ruling in this lawsuit could prevent or delay the consummation of the merger, result in substantial costs or both.

 

Cornell, its directors and GEO have been named in a purported stockholder class action complaint filed in Texas state court. The complaint alleges, among other things, that Cornell’s directors breached their fiduciary duties by entering into the merger agreement without first taking steps to obtain adequate, fair and maximum consideration for Cornell’s stockholders by shopping the company or initiating an auction process, by structuring the transaction to take advantage of Cornell’s current low stock valuation, and by structuring the transaction to benefit GEO while making an alternative transaction either prohibitively expensive or otherwise impossible, and that the corporate defendants have aided and abetted such breaches by Cornell’s directors. The plaintiffs are seeking, among other things, both an injunction prohibiting the merger and a constructive trust in an unspecified amount.

 

One of the conditions to the closing of the merger is that there not be any legal prohibition preventing the consummation of the merger, which would include the injunction sought by the plaintiffs in this case if it were to be granted. As a result, if the plaintiffs are successful in obtaining the injunction they seek, the merger may be blocked or delayed, or there could be substantial costs to GEO and/or Cornell. It is possible that other similar lawsuits may be filed in the future. Cornell cannot estimate any possible loss from this or similar future litigation at this time. Cornell has obligations under certain circumstances to hold harmless and indemnify each of the defendant directors against judgments, fines, settlements and expenses related to claims against such directors and otherwise to the fullest extent permitted under Delaware law and Cornell’s certificate of incorporation, bylaws and contractual agreements with its directors.

 

The shares of GEO common stock to be received by Cornell stockholders as a result of the merger will have different rights from the shares of Cornell common stock.

 

The rights associated with Cornell common stock are different from the rights associated with GEO common stock. See the section of this joint proxy statement/prospectus entitled “Comparison of Stockholder Rights” for a discussion of the different rights associated with Cornell common stock.

 

If the merger is not consummated by February 15, 2011, either Cornell or GEO may choose not to proceed with the merger.

 

Either Cornell or GEO may terminate the merger agreement if the merger has not been completed by February 15, 2011, unless the failure of the merger to be completed has resulted from the failure of the party seeking to terminate the merger agreement to perform its obligations.

 

If you tender shares of Cornell common stock to make an election (or follow the procedures for guaranteed delivery), you will not be able to sell those shares, unless you revoke your election prior to the election deadline.

 

You will receive an election form and other materials relating to your right to elect the form of merger consideration under the merger agreement and will be requested to send to the exchange agent your Cornell stock certificates (or follow the procedures for guaranteed delivery) together with the properly completed election form. If you want to make a cash or stock election, you must deliver your stock certificates (or follow the procedures for guaranteed delivery) and a properly completed and signed form of election to the exchange agent by the election deadline, which will be specified in the form of election. If you hold Cornell stock options and you wish to make an election as to the form of merger consideration, you must have exercised your options before the election deadline.

 

You will not be able to sell any shares of Cornell common stock that you have delivered, unless you revoke your election before the deadline by providing written notice to the exchange agent. If you do not revoke your

election, you will not be able to liquidate your investment in Cornell common stock for any reason until you receive cash and/or GEO common stock in the merger. In the time between delivery of your shares and the completion of the merger, the trading price of Cornell or GEO common stock may decrease, and you might otherwise want to sell your shares of Cornell to gain access to cash, make other investments, or reduce the potential for a decrease in the value of your investment.

 

The date that you will receive your merger consideration depends on the completion date of the merger, which is uncertain. The completion date of the merger might be later than expected due to unforeseen events, such as delays in obtaining required third-party approvals.

 

GEO and Cornell may experience difficulties integrating their businesses.

 

Currently, each company operates as an independent public company. Achieving the anticipated benefits of the merger will depend in significant part upon whether the two companies integrate their businesses in an efficient and effective manner. Due to legal restrictions, GEO and Cornell have been able to conduct only limited planning regarding the integration of the two companies following the merger and have not yet determined the exact nature of how the businesses and operations of the two companies will be combined after the merger. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. The companies may not be able to accomplish the integration process smoothly, successfully or on a timely basis. The necessity of coordinating geographically separated organizations, systems of controls, and facilities and addressing possible differences in business backgrounds, corporate cultures and management philosophies may increase the difficulties of integration. The companies operate numerous systems and controls, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance. The integration of operations following the merger will require the dedication of significant management and external resources, which may temporarily distract management’s attention from the day-to-day business of the combined company and be costly. Employee uncertainty and lack of focus during the integration process may also disrupt the business of the combined company. Any inability of management to successfully and timely integrate the operations of the two companies could have a material adverse effect on the business and results of operations of the combined company.

 

The combined company may not fully realize the anticipated synergies and related benefits of the merger or within the timing anticipated.

 

GEO and Cornell entered into the merger agreement because each company believes that the merger will be beneficial to each of GEO, the GEO shareholders, Cornell and the Cornell stockholders including, among other things, as a result of the anticipated synergies resulting from the combined company’s operations. GEO’s management anticipates annual synergies of $12-15 million during the year following the completion of the merger. The companies may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of the merger within the timing anticipated or at all. For example, elimination of duplicative costs may not be fully achieved or may take longer than anticipated. For at least the first year after the merger, and possibly longer, the benefits from the merger will be offset by the costs incurred in integrating the businesses and operations, or adverse conditions imposed by regulatory authorities on the combined business in connection with granting approval for the merger. An inability to realize the full extent of, or any of, the anticipated synergies or other benefits of the merger, as well as any delays that may be encountered in the integration process, which may delay the timing of such synergies or other benefits, could have an adverse effect on the business and results of operations of the combined company, and may affect the value of the shares of GEO common stock after the completion of the merger.

 

The merger may not be accretive and may cause dilution to the combined company’s earnings per share, which may harm the market price of GEO common stock after the merger.

 

While GEO believes the merger has the potential to be accretive to future earnings, there can be no assurance with respect to the timing and scope of the accretive effect or whether it will be accretive at all. The combined

company could encounter additional transaction and integration-related costs or other factors such as the failure to realize all of the benefits anticipated in the merger or a downturn in its business. All of these factors could cause dilution to the combined company’s earnings per share or decrease the expected accretive effect of the merger and cause a decrease in the price of GEO common stock after the merger.

 

The price of the common stock of the combined company may be affected by factors different from those affecting the price of GEO common stock or Cornell common stock independently.

 

After completion of the merger, as the combined company integrates the businesses of GEO and Cornell, the results of operations as well as the stock price of the combined company may be affected by factors different than those factors affecting GEO and Cornell as independent stand-alone entities. The combined company may face additional risks and uncertainties not otherwise facing each independent company prior to the merger. For a discussion of GEO’s and Cornell’s businesses and certain factors to consider in connection with their respective businesses, see the respective sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in each of GEO’s Annual Report on Form 10-K for the year ended January 3, 2010 and Cornell’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2009 and other documents incorporated by reference into this joint proxy statement/prospectus.

 

Charges to earnings resulting from the application of the acquisition method of accounting may adversely affect the market value of GEO common stock following the merger.

 

In accordance with GAAP, GEO will be considered the acquiror of Cornell for accounting purposes. GEO will account for the merger using the acquisition method of accounting. There may be charges related to the acquisition that are required to be recorded to GEO’s earnings that could adversely affect the market value of GEO common stock following the completion of the merger. Under the acquisition method of accounting, GEO will allocate the total purchase price to the assets acquired, including identifiable intangible assets, and liabilities assumed from Cornell based on their fair values as of the date of the completion of the merger, and record any excess of the purchase price over those fair values as goodwill. For certain tangible and intangible assets, revaluing them to their fair values as of the completion date of the merger may result in GEO’s incurring additional depreciation and amortization expense that may exceed the combined amounts recorded by GEO and Cornell prior to the merger. This increased expense will be recorded by GEO over the useful lives of the underlying assets. In addition, to the extent the value of goodwill or intangible assets were to become impaired after the merger, GEO may be required to incur charges relating to the impairment of those assets.

 

The combined company will incur significant transaction- and integration-related costs in connection with the merger.

 

GEO and Cornell expect to incur non-recurring costs associated with combining the operations of the two companies, including charges and payments to be made to some of their employees pursuant to “change in control” contractual obligations. GEO expects that the amount of these costs will be determined as of the effective time of the merger and may be material to the financial position and results of operations of the combined company. The substantial majority of non-recurring expenses resulting from the merger will be comprised of transaction costs related to the merger, facilities and systems consolidation costs, and employee-related costs. GEO and Cornell will also incur fees and costs related to formulating integration plans and performing these activities. Additional unanticipated costs may be incurred in the integration of the two companies’ businesses. The elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may not offset incremental transaction- and other integration-related costs in the near term.

 

The combined company will have substantial indebtedness following the merger, which may limit its financial flexibility.

 

Following the completion of the merger, the combined company is expected to have approximately $973.2 million in pro-forma total debt outstanding. This amount of indebtedness may limit the combined company’s flexibility as a result of its debt service requirements, and may limit the combined company’s ability to access additional capital and make capital expenditures and other investments in its business, to withstand

economic downturns and interest rate increases, to plan for or react to changes in its business and its industry, and to comply with financial and other restrictive covenants in its indebtedness.

 

Further, the combined company’s ability to comply with the financial and other covenants contained in its debt instruments may be affected by changes in economic or business conditions or other events beyond its control. If the combined company does not comply with these covenants and restrictions, it may be required to take actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing all or part of its existing debt, or seeking additional equity capital.

 

GEO may have failed to discover undisclosed liabilities of Cornell.

 

GEO’s investigations and due diligence review of Cornell may have failed to discover undisclosed liabilities of Cornell. If Cornell has undisclosed liabilities, GEO as a successor owner may be responsible for such undisclosed liabilities. GEO has tried to minimize its exposure to undisclosed liabilities by obtaining certain protections under the merger agreement, including representations and warranties from Cornell regarding undisclosed liabilities. However, there can be no assurance that such provisions in the merger agreement will protect GEO against any undisclosed liabilities being discovered or provide an adequate remedy for any undisclosed liabilities that are discovered. Additionally, the representations and warranties from Cornell do not survive beyond the effective time of the merger. Therefore, there can be no assurance that GEO will have a remedy that is enforceable, collectible or sufficient in amount, scope or duration, or a remedy at all, to offset, fully or partially, any undisclosed liabilities arising from the merger. Such undisclosed liabilities could have an adverse effect on the business and results of operations of GEO and may adversely affect the value of the shares of GEO common stock after the consummation of the merger.

 

Cornell may have failed to discover undisclosed liabilities of GEO.

 

Cornell’s investigations and due diligence review of GEO may have failed to discover undisclosed liabilities of GEO. Cornell has tried to minimize its exposure to undisclosed liabilities by obtaining certain protections under the merger agreement, including representations and warranties from GEO regarding undisclosed liabilities. However, there can be no assurance that such provisions in the merger agreement will protect Cornell against any undisclosed liabilities being discovered or provide an adequate remedy for any undisclosed liabilities that are discovered. Additionally, the representations and warranties from GEO do not survive beyond the effective time of the merger. Therefore, there can be no assurance that the combined company will have a remedy that is enforceable, collectible or sufficient in amount, scope or duration, or any remedy at all, to offset, fully or partially, any undisclosed liabilities of GEO. Such undisclosed liabilities could have an adverse effect on the business and results of operations of the combined company, and may adversely affect the value of the shares of GEO common stock after the consummation of the merger.

 

The merger will result in GEO reentering the market of operating juvenile correctional facilities which may pose certain risks and difficulties compared to other facilities.

 

As a result of the merger, GEO will reenter the market of operating juvenile correctional facilities. GEO intentionally exited this market a number of years ago. Operating juvenile correctional facilities may pose increased operational risks and difficulties that may result in increased litigation, higher personnel costs, higher levels of turnover of personnel and reduced profitability. Additionally, juvenile services contracts related to educational services may provide for annual collection several months after a school year is completed. GEO cannot assure you that the combined company will be successful in operating juvenile correctional facilities or that it will minimize the risks and difficulties involved while yielding an attractive profit margin.

 

The combined company’s goodwill or other intangible assets may become impaired, which could result in material non-cash charges to its results of operations.

 

The combined company will have a substantial amount of goodwill and other intangible assets resulting from the merger. At least annually, or whenever events or changes in circumstances indicate a potential impairment in the carrying value as defined by GAAP, the combined company will evaluate this goodwill for impairment based on the

fair value of each reporting unit. Estimated fair values could change if there are changes in the combined company’s capital structure, cost of debt, interest rates, capital expenditure levels, operating cash flows, or market capitalization. Impairments of goodwill or other intangible assets could require material non-cash charges to the combined company’s results of operations.

 

Future results of the combined company may differ materially from the unaudited pro forma financial statements presented in this joint proxy statement/prospectus.

 

The combined company’s future results may be materially different from those shown in the unaudited pro forma financial statements presented in this joint proxy statement/prospectus that show only a combination of GEO’s and Cornell’s historical results. GEO expects to incur significant costs associated with completing the merger and combining the operations of the two companies, and the exact magnitude of these costs is not yet known. Furthermore, these costs may decrease capital that could be used by GEO for income-earning investments in the future.

 

This joint proxy statement/prospectus contains certain forward-looking information about GEO, Cornell and the combined company that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this joint proxy statement/prospectus or may be incorporated into this joint proxy statement/prospectus by reference to other documents and may include statements for the period following the completion of the merger. Representatives of GEO and Cornell may also make forward-looking statements. Forward-looking statements are statements that are not historical facts. Words such as “expect,” “believe,” “will,” “may,” “anticipate,” “plan,” “estimate,” “intend,” “should,” “can,” “likely,” “could” and similar expressions are intended to identify forward-looking statements. These statements include statements about the expected benefits of the merger, information about the combined company, including expected synergies, combined operating and financial data and the combined company’s objectives, plans and expectations, the likelihood of satisfaction of certain conditions to the completion of the merger and whether and when the merger will be consummated. Forward-looking statements are not guarantees of performance. These statements are based upon the current beliefs and expectations of the management of each of GEO and Cornell and are subject to risks and uncertainties, including the risks described in this joint proxy statement/prospectus under the section “Risk Factors” and those that are incorporated by reference into this joint proxy statement/prospectus that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

 

In light of these risks, uncertainties, assumptions and factors, the results anticipated by the forward-looking statements discussed in this joint proxy statement/prospectus, in documents incorporated by reference into this joint proxy statement/prospectus or made by representatives of GEO or Cornell may not occur. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof or, in the case of statements incorporated by reference, on the date of the document incorporated by reference, or, in the case of statements made by representatives of GEO or Cornell, on the date those statements are made. All subsequent written and oral forward-looking statements concerning the merger or the combined company or other matters addressed in this joint proxy statement/prospectus and attributable to GEO or Cornell or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, neither GEO nor Cornell undertakes any obligation to update or publish revised forward-looking statements to reflect events or circumstances after the date hereof or the date of the forward-looking statements or to reflect the occurrence of unanticipated events.

 

The following discussion contains important information relating to the merger. You are urged to read this discussion together with the merger agreement and related documents attached as annexes to this joint proxy statement/prospectus before voting.

 

 

Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, GEO Acquisition III, Inc., a wholly owned subsidiary of GEO that was formed for the purpose of the merger, will be merged with and into Cornell, with Cornell surviving the merger and becoming a wholly owned subsidiary of GEO. Immediately following the merger, GEO will continue to be named “The GEO Group, Inc.” and will be the parent company of Cornell. Accordingly, after the effective time of the merger, shares of Cornell common stock will no longer be publicly traded.

 

 

Cornell Stockholders.  At the effective time of the merger, each outstanding share of Cornell common stock will be converted into the right to receive either (i) 1.3 shares of GEO common stock, or (ii) an amount of cash consideration equal to the greater of (x) the fair market value of one share of GEO common stock plus $6.00 or (y) the fair market value of 1.3 shares of GEO common stock. Cornell stockholders desiring to receive a combination of GEO common stock and cash may do so by making a stock election with respect to a portion of their shares and a cash election with respect to their remaining shares. If a Cornell stockholder fails to make an election, the holder will receive the stock consideration. “Fair market value” of GEO common stock for the purpose of determining the cash consideration means the average of the daily closing prices per share of GEO common stock for the ten consecutive trading days on which shares of GEO common stock are actually traded (as reported on the NYSE) ending on the trading day immediately preceding the tenth business day preceding the closing date. Cornell stockholders have the opportunity to elect whether to receive stock consideration or cash consideration as provided above. However, the merger agreement provides that notwithstanding such elections, no more than 20% of the shares of Cornell common stock are permitted to be exchanged for cash consideration. If cash elections are made with respect to more than 20% of Cornell’s shares, the excess over 20% shall be treated as if a stock election had been made with respect to such excess shares and they will be exchanged for shares of GEO common stock. In such event, a pro rata portion (rounded up to the nearest whole share) of each holder’s shares of Cornell common stock with respect to which an election was made to elect cash consideration shall instead be converted to GEO common stock. Additionally, if the application of the above procedures and limitations relating to the merger agreement would result in more than $100.0 million of cash being paid to Cornell stockholders electing cash consideration, then GEO may elect, in its sole discretion, to reduce the amount of cash paid to each Cornell stockholder electing cash consideration on a pro rata basis so that the total cash paid with respect to all cash consideration is $100.0 million. If the cash consideration otherwise payable to any holder of Cornell common stock is reduced under this clause, such holder shall be entitled to receive GEO common stock at a fair market value (as defined above) equal to the amount of the reduction.

 

Election Procedure.  An election form and letter of transmittal have been enclosed with this joint proxy statement/prospectus pursuant to which Cornell stockholders may elect whether they would prefer to receive GEO common stock or cash in exchange for their Cornell shares. If you were a record holder of Cornell common stock on the Cornell record date, you should carefully review and follow the instructions included in the election form and the letter of transmittal. To make an election, record holders must properly complete and sign the election form and letter of transmittal and send those documents and the certificates for their shares (or a properly completed notice of guaranteed delivery) to the exchange agent at the address listed in the election form and letter of transmittal by the election deadline, which is 5:00 p.m., New York time, on               , 2010. If the merger agreement is terminated, all election forms delivered to the exchange agent on or prior to the date of such termination will be automatically revoked and all share certificates will be returned. Please do not send your election form and stock certificates with your proxy card for the special meeting. Your election form and stock certificates are to be submitted separately from your proxy card.

 

If you own shares of Cornell common stock in “street name” through a broker or other financial institution, you will receive or should seek instructions from the institution holding your shares concerning how to make your election. Any instructions must be given to your broker or other financial institution sufficiently in advance of the election deadline for record holders in order to allow your broker or financial institution sufficient time to cause the

record holder of your shares to make an election as described above. Therefore, you should carefully read any materials you receive from your broker.

 

If you are a record holder of Cornell shares, you may change your election or change the number of shares for which you have made an election at any time prior to the election deadline by sending a signed written notice to the exchange agent identifying the shares of Cornell common stock for which you are changing your election along with a properly completed revised election form. For a change of an election to be effective, it must be received by the exchange agent prior to the election deadline. In addition, a record holder may revoke an election at any time prior to the election deadline by delivering to the exchange agent a written notice of revocation. A revocation of a proxy shall also be deemed a revocation of an election with respect to the merger consideration. Shares of Cornell common stock as to which an election has been revoked after the election deadline will be deemed non-election shares, and no new election as to such shares may be made after the election deadline. If you hold your shares in “street name,” you must follow your broker’s instructions for changing or revoking an election.

 

All elections are subject to the proration procedures described above. If you do not make a valid election, your shares will be considered non-election shares, and when the merger is completed you will be entitled to receive the stock consideration for non-election shares as described above.

 

GEO Shareholders.  GEO shareholders will continue to own their existing shares of GEO common stock after the merger. Each share of GEO common stock will represent one share of common stock in the combined company.

 

Fractional Shares.  GEO will not issue fractional shares of GEO common stock in the merger. All fractional shares of GEO common stock to which a holder of shares of Cornell common stock would otherwise be entitled as a result of the merger will be aggregated. For any fractional share that results from such aggregation, the exchange agent will pay the holder an amount of cash, without interest, equal to the product of such fraction of a share of GEO common stock which the Cornell stockholder would otherwise have been entitled to receive pursuant to the merger multiplied by the closing sale price of a share of GEO common stock on the NYSE on the trading day that is one trading day prior to the closing date. GEO shall deposit with the exchange agent the funds required to make such cash payments when and as needed.

 

As of January 3, 2010, approximately 51.6 million shares of GEO common stock were outstanding and approximately 3.7 million shares of GEO common stock were reserved for the exercise of outstanding GEO options and settlement of other outstanding GEO equity-based awards. In accordance with terms of the merger, at the effective time of the merger, GEO (1) will issue up to approximately 15.6 million shares of GEO common stock to Cornell stockholders pursuant to the merger and (2) will reserve for issuance approximately 0.2 million shares of GEO common stock in connection with the exercise or settlement of Cornell equity-based awards. GEO and Cornell expect that the shares of GEO common stock issued in connection with the merger in respect of Cornell common stock will represent approximately 23.3% of the outstanding common stock of the combined company immediately after the merger on a diluted basis. Shares of GEO common stock held by GEO shareholders immediately prior to the merger will represent approximately 76.7% of the outstanding common stock of the combined company immediately after the merger on a diluted basis.

 

Since 2003, GEO and Cornell, through their respective management teams and representatives, have discussed a potential strategic combination on a number of occasions. In 2004 and again in 2007, the companies undertook extensive due diligence and entered into negotiations regarding definitive merger agreements. However, the companies did not consummate a transaction in either year.

 

Following the failure to consummate a transaction in 2004, representatives of the companies continued to hold informal discussions regarding a potential business combination. James E. Hyman, Cornell’s Chairman, Chief Executive Officer and President, and George C. Zoley, GEO’s Chairman and Chief Executive Officer, have known each other professionally since early 2005 and from time to time have had informal conversations about their

respective companies and the possibility of a strategic combination. In 2006, Cornell conducted a review of strategic alternatives involving multiple industry participants and potential private equity partners. That process eventually resulted in a merger agreement with a private equity company that Cornell’s stockholders rejected in January 2007.

 

In May 2007, representatives of GEO contacted representatives of Cornell and proposed that GEO acquire Cornell in an all stock transaction. Substantive discussions between representatives of the companies and extensive due diligence continued from May through October. However, the parties were ultimately unable to agree on terms for a proposed transaction and, on October 22, 2007, discussions regarding a combination were terminated. Thereafter, Mr. Hyman, from time to time, continued to have informal discussions on strategic combinations with other industry participants.

 

On July 2, 2009, GEO, through its representatives, delivered to Cornell a written proposal whereby GEO proposed to acquire Cornell in an all stock transaction at an exchange ratio of 1.05 shares of GEO common stock for each outstanding share of Cornell common stock. Prior to the receipt of such proposal, the Cornell board of directors had directed Cornell senior management to undertake a review of Cornell’s strategic alternatives, based on the broader industry and economic climate. Following the receipt of this proposal, on July 9, 2009, the Cornell board of directors met with representatives of Moelis & Company LLC, hereafter referred to as Moelis & Company, Cornell’s financial advisor, to evaluate the terms of the proposal and to consider strategic alternatives available to Cornell including, among other things, the relative advantages of a strategic combination with GEO. Based on its evaluation, the Cornell board of directors rejected the proposal.

 

Following the rejection of the proposal, the Cornell board of directors continued to discuss strategic opportunities and alternatives for Cornell at regularly scheduled meetings. Those discussions included evaluations of strategies to enhance Cornell’s business through internal and external means.

 

In August 2009, Messrs. Hyman and Zoley again informally discussed the possibility of re-initiating conversations regarding a potential transaction between GEO and Cornell. No formal terms were proposed at that time. During the ensuing months, Mr. Zoley periodically kept the members of GEO’s board of directors apprised that Cornell was potentially interested in engaging in discussions once again.

 

On February 18, 2010, at a meeting of the corporate planning committee of the GEO board of directors, Mr. Zoley discussed at length with the GEO board members various growth opportunities that GEO was in the process of evaluating. During this meeting, Mr. Zoley once again discussed the potential acquisition of Cornell. Mr. Zoley also provided to the GEO board members selected preliminary pro forma information regarding the potential impact of an acquisition of Cornell on GEO’s business, including certain key financial and operating metrics.

 

On March 3, 2010, Messrs. Hyman and Zoley met and discussed GEO’s continued interest in a strategic business combination. During this meeting, Mr. Hyman and Mr. Zoley discussed a proposal whereby GEO would acquire Cornell in an all stock transaction at an exchange ratio of 1.25 shares of GEO common stock for each outstanding share of Cornell common stock. In the days following, Mr. Hyman, following separate telephonic communications with each member of the Cornell board of directors, continued to engage in informal conversations with a number of potential domestic and international strategic partners. Such discussions continued throughout the months of March and April.

 

At a meeting held on March 26, 2010, the Cornell board of directors met with representatives of Moelis & Company and Cornell senior management present, including Mr. Hyman. Mr. Hyman outlined Mr. Zoley’s proposal to Cornell’s board of directors. The board discussed the proposal and other strategic considerations and potential strategic alternatives available to Cornell. At this meeting, the Cornell board of directors appointed a special committee of the board comprised solely of independent directors, referred to herein as the special committee, to evaluate strategic alternatives, including GEO’s proposal and any proposals received from other parties, and to negotiate the terms of any definitive transaction documents. The special committee further determined to retain Hogan Lovells US LLP, hereafter referred to as Hogan Lovells, as legal counsel in connection with the evaluation of proposals.

On April 1, 2010, the special committee met with representatives of Moelis & Company and Cornell senior management regarding the status of discussions with various potential strategic partners. Representatives of Cornell senior management informed the special committee that a potential strategic acquirer expressed limited general interest in a transaction but it, and each of the other parties contacted, did not appear interested in specific discussions at that time. The special committee, following discussion concerning these parties, and following a review of the fiduciary duties of the Cornell board of directors with representatives of Hogan Lovells, determined, among other things, that Mr. Hyman should inform Mr. Zoley that Cornell, through the special committee, would be willing to proceed with discussions concerning a potential strategic transaction and to request that Mr. Zoley submit a written proposal for the special committee’s consideration. Additionally, the special committee determined that representatives of Cornell senior management and Moelis & Company should continue communications with other potential strategic acquirers. Immediately following the meeting, Mr. Hyman contacted Mr. Zoley as directed.

 

On April 2, 2010, GEO submitted a written, non-binding proposal to the board of directors of Cornell pursuant to which GEO proposed to acquire all of the outstanding common stock of Cornell in exchange for either stock consideration at an exchange ratio of 1.25 shares of GEO common stock for each outstanding share of Cornell common stock, or a mix of cash and stock consideration equal to one share of GEO common stock plus $4.00 in cash for each outstanding share of Cornell common stock, at the election of each Cornell stockholder. The proposal further requested that GEO and Cornell adhere to an expedited transaction timeline and due diligence process.

 

On April 5, 2010, the special committee of Cornell met with representatives of Hogan Lovells and Moelis & Company, with members of Cornell senior management present, to consider GEO’s proposal and to receive an update as to the status of discussions with various other potential strategic acquirers. A representative of Moelis & Company and members of Cornell senior management informed the special committee that the other potential strategic acquirers were not interested in substantive discussions at that time and a representative of Moelis & Company reviewed with the Cornell board of directors the likelihood of interest by, and ability to procure acquisition financing of, other potential parties. Mr. Hyman outlined the terms of GEO’s proposal and the proposed timeline. Representatives of Moelis & Company outlined for the special committee the substance of discussions concerning the proposal held with GEO’s outside counsel. A representative of Moelis & Company answered questions from the members of the special committee regarding the specific terms of the offer and representatives of Hogan Lovells reviewed the fiduciary duties of the Cornell board of directors. Following discussion among its members, the special committee determined that Moelis & Company should contact representatives of GEO to communicate that the special committee had rejected GEO’s proposal because the special committee believed that GEO’s proposal constituted an inadequate premium to the trading price of Cornell’s common stock. Immediately following the meeting, representatives of Moelis & Company contacted GEO as directed. Discussions continued throughout the week of April 5, 2010 between Moelis & Company and representatives of GEO concerning the specific financial terms of a possible revised proposal.

 

On April 9, 2010, GEO held internal discussions and conducted a detailed review of, among other things, its valuation of Cornell. Representatives of GEO subsequently contacted representatives of Moelis & Company to orally communicate that (i) GEO would revise its offer such that all of the outstanding common stock of Cornell would be exchanged for either stock consideration at an exchange ratio of 1.25 shares of GEO common stock for each outstanding share of Cornell common stock, or a mix of cash and stock consideration equal to one share of GEO common stock plus $5.00 in cash for each outstanding share of Cornell common stock, at the election of each Cornell stockholder, and (ii) no seats on the board of directors of GEO would be offered to Cornell as part of the transaction.

 

On April 9, 2010, the special committee met with representatives of Hogan Lovells, Moelis & Company and members of Cornell senior management present to discuss GEO’s revised proposal. Following discussion among those present concerning the revised terms of the proposal, financial analysis conducted by Moelis & Company concerning Cornell and GEO and a review of the fiduciary duties of the Cornell board of directors with representatives of Hogan Lovells, the special committee determined to reject GEO’s revised proposal and to submit a counter proposal in writing to GEO which would result in Cornell stockholders receiving, for each outstanding share of Cornell common stock, either (i) 1.3 shares of GEO common stock, or (ii) the cash value of one share of GEO common stock plus $6.00, at such stockholders’ election.

On April 10, 2010, representatives of GEO and GEO senior management held extensive discussions regarding the terms of the special committee’s counterproposal. Following those discussions, on April 11, 2010, GEO submitted a revised written, non-binding proposal to acquire Cornell pursuant to which Cornell’s stockholders could elect to receive in exchange for each outstanding share of Cornell common stock either (i) 1.3 shares of GEO common stock, or (ii) the cash value of one share of GEO common stock plus $6.00, at such stockholders’ election. The proposal provided for the execution of a definitive merger agreement on April 18, 2010 and a public announcement of the transaction on April 19, 2010.

 

Hogan Lovells received the first draft of the definitive merger agreement from GEO’s counsel on April 13, 2010. Thereafter, the parties and their respective advisors continued mutual due diligence and, from April 13, 2010 through April 18, 2010, negotiated the terms of a definitive merger agreement and ancillary documents. The parties largely completed their due diligence efforts on April 16, 2010.

 

On April 15, 2010, the GEO board of directors held a telephonic meeting to discuss the proposed acquisition of Cornell. Mr. Zoley summarized the status of recent discussions and negotiations that had taken place regarding the proposed transaction. He then reviewed in detail the terms of GEO’s proposal letter, dated April 11, 2010, which is summarized above. A copy of the letter had been provided to the GEO board of directors in advance of the meeting. Mr. Zoley next reviewed the extensive history of discussions between the two companies and the substantial due diligence that GEO had conducted over the years on Cornell’s business. Discussions were then had regarding the board’s significant familiarity with Cornell’s business and operations. Several GEO board members expressed optimism that Cornell appeared to once again have an interest in pursuing a transaction but questioned whether a transaction could actually be completed on mutually satisfactory terms given the parties’ history of terminated discussions. A number of key factors relating to transaction execution were then considered, including, among other things, the extensive amount of due diligence the parties had conducted on each other’s respective businesses in the past, the information that was publicly available on both companies due to their status as SEC reporting companies, the companies’ status as competitors in the corrections industry, and the risk that a lengthy process could significantly increase the possibility that news of a potential transaction could leak and make the transaction highly improbable. After taking these and other relevant factors into account, the GEO board of directors supported GEO management’s view that an expedited timeline for negotiations and due diligence would be an advisable strategy for successfully executing a definitive merger agreement with respect to a proposed transaction. Representatives of Akerman Senterfitt then reviewed the proposed terms of the merger agreement with Cornell in detail. Extensive discussions were had regarding various key terms and provisions of the merger agreement. Following these discussions on the merger agreement, representatives of Akerman Senterfitt delivered a detailed presentation regarding the GEO board of directors’ fiduciary duties in connection with its review and approval of the proposed transaction with Cornell. After extensive discussion, the meeting was adjourned.

 

On April 16, 2010, the board of directors of Cornell, including the members of the special committee, met with representatives of Hogan Lovells, Moelis & Company and members of Cornell senior management present to discuss the status of due diligence efforts and negotiations concerning the definitive merger agreement. Representatives of Hogan Lovells, Moelis & Company and Cornell senior management reviewed for the board, among other things, the directors’ fiduciary duties, the proposed deal structure, preliminary due diligence results and certain of GEO’s corporate governance practices and policies. The parties continued negotiations following such meeting.

 

The special committee met again on April 18, 2010 with representatives of Hogan Lovells, Moelis & Company and members of Cornell senior management present to confer and agree upon a recommendation to the board of directors of Cornell regarding a potential transaction with GEO. During this meeting, Mr. Hyman outlined a revised proposal pursuant to which Cornell’s stockholders could elect to receive in exchange for each outstanding share of Cornell common stock either (i) 1.3 shares of GEO common stock or (ii) the greater of the cash equivalent of (a) 1.3 shares of GEO common stock or (b) one share of GEO common stock plus $6.00, at the election of each Cornell stockholder. GEO’s proposal was contingent upon certain conditions, including, among other things, that no more than 20% of the shares of Cornell common stock be exchanged for the cash consideration and that the aggregate cash consideration payable would not, except in GEO’s sole discretion, exceed $100.0 million. The proposal was discussed at length by the members of the special committee and the special committee’s legal and financial advisors. Representatives of Hogan Lovells also reviewed the status of the negotiations concerning the

definitive merger agreement and thereafter the members of the special committee unanimously determined to recommend, subject to the receipt of definitive documentation from GEO consistent with the terms of the transaction as presented by Mr. Hyman, the acceptance of GEO’s proposal to the board of directors of Cornell.

 

Immediately thereafter, the board of directors of Cornell, including the members of the special committee, met with representatives of Hogan Lovells, Moelis & Company and members of Cornell senior management present to consider the proposed transaction. Mr. Hyman outlined the terms of GEO’s revised merger proposal. Representatives of Hogan Lovells advised the board of directors of its fiduciary duties and its confidentiality obligations, and also reviewed the terms of the draft merger agreement with the board of directors and answered questions from the board members about the transaction documents, including with respect to events which would trigger the payment of a termination fee by Cornell to GEO and the fiduciary duties of the Cornell board of directors in connection with the receipt of superior proposals. A representative of Moelis & Company presented its updated financial analysis of the proposed merger and explained to the members of the Cornell board of directors the mechanics of the proposed election to be made by Cornell stockholders and other details regarding the transaction structure. In connection with its deliberations, the Cornell board of directors considered written materials distributed in advance of the meeting by Moelis & Company. Representatives of Hogan Lovells also reviewed with the board the final results of the due diligence conducted on GEO. The directors then engaged in a discussion with their advisors about the transaction. Following such discussion, a representative of Moelis & Company orally expressed its opinion (subsequently confirmed in writing) that as of such date, based upon and subject to the considerations, assumptions, qualifications and limitations set forth therein, the consideration to be received in the merger by the holders of shares of Cornell common stock (viewed solely in their capacities as holders of shares of Cornell common stock), was fair from a financial point of view. Mr. Hyman disclosed to the Cornell board of directors that GEO had requested him to extend by one year, contingent upon the consummation of the merger, the term of the non-competition period contained in Mr. Hyman’s employment agreement. Such extension would be made on mutually-agreeable terms to be documented after execution of the merger agreement. Mr. Hyman reviewed the proposed terms of such understanding, which had not yet been finalized, and responded to questions from the Cornell board of directors relating thereto. As of the date hereof, the parties are working to agree on definitive documentation agreeable to both parties regarding the extension of Mr. Hyman’s non-competition period. Thereafter, the special committee expressed its unanimous recommendation of the transaction to the Cornell board of directors and then the Cornell board of directors, having taken into consideration the information presented, including the opinion of Moelis & Company, approved the merger of GEO and Cornell and the merger agreement, and voted to recommend the adoption of the merger agreement to the holders of Cornell’s common stock. Promptly following the vote of the members of the board of directors, Moelis & Company delivered its written opinion, dated April 18, 2010, a copy of which is attached hereto as Annex E.

 

On April 18, 2010, the GEO board of directors met with representatives of Akerman Senterfitt and GEO’s financial advisors to discuss the proposed transaction with Cornell. During the meeting, Mr. Zoley outlined the revised merger proposal. Barclays Capital and BofA Merrill Lynch reviewed with the GEO board of directors their financial analysis of the proposed merger consideration and each rendered to the GEO board of directors an oral opinion (confirmed by delivery of a written opinion) to the effect that, as of such date and based upon and subject to the considerations, assumptions, qualifications and limitations set forth therein, the consideration to be paid by GEO in the merger was fair, from a financial point of view, to GEO. Representatives of Akerman Senterfitt then reviewed with the GEO board of directors the results of GEO’s due diligence review and the terms of the merger agreement. An extensive discussion was had regarding various key terms and provisions of the merger agreement. Representatives of Akerman Senterfitt also discussed the fiduciary duties of the GEO board of directors with respect to the potential transaction. Thereafter, the GEO board of directors, having taken into consideration the information presented and the factors noted below in the section captioned “GEO Reasons for the Merger and the Recommendation of GEO’s Board of Directors Relating to the Merger,” approved the merger of GEO and Cornell, the merger agreement and the GEO share issuance. The GEO board of directors voted to recommend that the GEO shareholders approve the GEO share issuance in connection with the merger. Following the vote of the members of the GEO board of directors, Barclays Capital and BofA Merrill Lynch each delivered their individual written opinions, dated April 18, 2010, copies of which are attached hereto as Annex C and Annex D.

Following the approval of Cornell’s board of directors, the parties executed the merger agreement and certain related agreements on April 18, 2010 and a joint press release was issued on the morning of April 19, 2010.

 

The GEO board of directors believes that the merger will provide GEO shareholders with an interest in a combined company with an enhanced platform to deliver high quality, diversified government services and pursue new growth opportunities. In evaluating the GEO share issuance in connection with the merger, the GEO board of directors consulted with GEO’s senior management and legal and financial advisors. The GEO board of directors has (i) determined that the merger consideration is fair, from a financial point of view, and (ii) recommended the approval of the GEO share issuance in connection with the merger to the GEO shareholders.

 

In reaching its conclusion to recommend the GEO share issuance in connection with the merger, the GEO board of directors considered a number of factors, including those discussed below:

 

Strategic Considerations

 

 

 

 

Financial Considerations

 

 

 

Integration Considerations

 

 

In the course of its deliberations, the GEO board of directors also considered a variety of risks and other factors, relating to the merger, including

 

 

In reaching its decision to recommend approval of the GEO share issuance to GEO’s shareholders in connection with the merger, the GEO board of directors did not quantify or assign any relative weights to different factors. The GEO board of directors considered all of these factors as a whole, and overall considered them to be favorable to, and to support, its determination.

 

The GEO board of directors has determined that the GEO share issuance in connection with the merger is advisable and in the best interests of GEO and its shareholders. The GEO board of directors recommends that GEO shareholders vote “FOR” the GEO share issuance and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the foregoing proposals.

 

GEO engaged Barclays Capital and BofA Merrill Lynch as GEO’s financial advisors in connection with the merger. At an April 18, 2010 meeting of GEO’s board of directors held to evaluate the merger, Barclays Capital and BofA Merrill Lynch rendered to GEO’s board of directors separate oral opinions, subsequently confirmed by delivery of separate written opinions dated April 18, 2010, to the effect that, as of that date and based on and subject to the qualifications, limitations and assumptions stated in such opinions, the consideration to be paid by GEO in the merger was fair, from a financial point of view, to GEO.

 

The separate written opinions, each dated April 18, 2010, are attached as Annexes C and D, respectively, to this joint proxy statement/prospectus. The written opinions set forth, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken by GEO’s financial advisors in rendering their respective opinions. The following summaries are qualified in their entirety by reference to the full text of each such opinion. The opinions are addressed to GEO’s board of directors for its use in connection with its evaluation of the merger consideration and relate only to the fairness, from a financial point of view, to GEO of the consideration to be paid by GEO in the merger. The opinions do not in any manner address GEO’s underlying business decision to proceed with or effect the merger or any other matter and are not intended to and do not constitute a recommendation to any shareholder as to how such shareholder should vote or act with respect to the merger or any related matter.

 

The terms of the merger were determined through negotiations between GEO and Cornell, rather than by any financial advisor, and the decision to enter into the merger agreement was solely that of GEO’s board of directors. Barclays Capital and BofA Merrill Lynch did not recommend any specific form of consideration to GEO’s board of directors or that any specific form of consideration constituted the only appropriate consideration for the merger. The opinions were only one of many factors considered by GEO’s board of directors in its evaluation of the merger

and should not be viewed as determinative of the views of GEO’s board of directors, management or any other party with respect to the merger or the consideration payable in the merger.

 

Summary of Barclays Capital’s Opinion

 

In arriving at its opinion, Barclays Capital, among other things:

 

 

In arriving at its opinion, Barclays Capital assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays Capital without any independent verification of such information and further relied upon the assurances of GEO’s and Cornell’s managements that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the Cornell forecasts, upon Cornell’s advice, Barclays Capital assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Cornell’s management as to the future financial performance of Cornell. With respect to the adjusted Cornell forecasts and the GEO forecasts, upon GEO’s advice, Barclays Capital assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of GEO’s management as to the future financial performance of Cornell and GEO and that Cornell and GEO would perform substantially in accordance with such projections, and Barclays Capital relied on the adjusted Cornell forecasts and the GEO forecasts in arriving at its opinion. In addition, upon GEO’s advice, Barclays Capital assumed that the amount and timing of the cost savings were reasonable and would

be realized in accordance with such estimates. Barclays Capital assumed no responsibility for and expressed no view as to any projections or estimates reviewed by it or the assumptions on which they were based. In arriving at its opinion, Barclays Capital did not conduct a physical inspection of the properties and facilities of Cornell or GEO and did not make or obtain any evaluations or appraisals of the assets or liabilities, contingent or otherwise, of Cornell or GEO. Barclays Capital’s opinion necessarily was based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of its opinion. Barclays Capital assumed no responsibility for updating or revising its opinion based on events or circumstances that may occur after the date of its opinion. Barclays Capital expressed no opinion as to the prices at which shares of GEO common stock or Cornell common stock would trade at any time following the announcement of the merger or the prices at which shares of GEO common stock would trade at any time following consummation of the merger.

 

Barclays Capital assumed the accuracy of the representations and warranties contained in the merger agreement and all related agreements. Barclays Capital also assumed, upon GEO’s advice, that all material governmental, regulatory and third party approvals, consents and releases for the merger would be obtained within the constraints contemplated by the merger agreement and that the merger would be consummated in accordance with the merger agreement without waiver, modification or amendment of any material term, condition or agreement. Barclays Capital’s opinion does not in any manner address the form or structure of the merger, the form or structure of the merger consideration or any election, limitations or proration procedures relating to the merger consideration. Barclays Capital also did not express any opinion as to any tax or other consequences that might result from the merger, nor did its opinion address any legal, tax, regulatory or accounting matters, as to which Barclays Capital understood that GEO had obtained such advice as it deemed necessary from qualified professionals.

 

Barclays Capital was not requested to opine as to, and its opinion did not in any manner address, GEO’s underlying business decision to proceed with or effect the merger or the likelihood of consummation of the merger. In addition, Barclays Capital expressed no opinion on, and its opinion did not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the consideration to be paid by GEO in the merger or otherwise. The issuance of Barclays Capital’s opinion was approved by Barclays Capital’s fairness opinion committee. Barclay Capital’s opinion is not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act with respect to the merger or any related matter. Except as described above, GEO imposed no other instructions or limitations on Barclays Capital with respect to the investigations made or the procedures followed by it in rendering its opinion.

 

Barclays Capital is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. GEO selected Barclays Capital because of its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally.

 

As compensation for Barclays Capital’s financial advisory services to GEO in connection with the merger, GEO has agreed to pay Barclays Capital an aggregate fee of $3.75 million, a portion of which was payable upon execution of the merger agreement and $3.375 million of which is contingent upon the consummation of the merger. In addition, GEO has agreed to reimburse Barclays Capital for expenses, including fees and disbursements of Barclays Capital’s counsel, and indemnify Barclays Capital and related parties for certain liabilities that may arise out of Barclays Capital’s engagement. Barclays Capital and its affiliates have performed various investment banking and financial services for GEO in the past, and expect to perform such services in the future, and have received, and expect to receive, customary fees for such services. Specifically, in the past two years, Barclays Capital and its affiliates have acted as (i) joint book runner on certain debt offerings of GEO and (ii) financial advisor to GEO in connection with GEO’s share buy-back program. In addition, an affiliate of Barclays Capital currently is a lender under certain of GEO’s credit facilities. Barclays Capital and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial services. In the ordinary course of business, Barclays Capital and its affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments

(including loans and other obligations) of GEO, Cornell and certain of their respective affiliates for our own account and for the accounts of our customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments.

 

Summary of BofA Merrill Lynch’s Opinion

 

In connection with rendering its opinion, BofA Merrill Lynch, among other things:

 

 

In arriving at its opinion, BofA Merrill Lynch assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of the managements of GEO and Cornell that they were not aware of any facts or circumstances that would make such information or data inaccurate or

misleading in any material respect. With respect to the Cornell forecasts, BofA Merrill Lynch was advised by Cornell, and assumed, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of Cornell’s management as to the future financial performance of Cornell. With respect to the adjusted Cornell forecasts, GEO forecasts and cost savings, BofA Merrill Lynch assumed, at GEO’s direction, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of GEO’s management as to the future financial performance of Cornell and GEO and the other matters covered thereby and, based on the assessments of GEO’s management as to the relative likelihood of achieving the future financial results reflected in the Cornell forecasts and the adjusted Cornell forecasts, BofA Merrill Lynch relied, at GEO’s direction, on the adjusted Cornell forecasts for purposes of its opinion. BofA Merrill Lynch also relied, at GEO’s direction, on the assessments of GEO’s management as to GEO’s ability to achieve the cost savings and was advised by GEO, and assumed, that the cost savings would be realized in the amounts and at the times projected. BofA Merrill Lynch further relied, at GEO’s direction, upon the assessments of GEO’s management as to Cornell’s existing and future relationships, agreements and arrangements with, and GEO’s ability to retain, key management contracts of Cornell and as to the ability of GEO to integrate the businesses of GEO and Cornell and assumed that there would be no developments with respect to any such matters that would have an adverse effect on Cornell, GEO or the contemplated benefits of the merger.

 

BofA Merrill Lynch did not make and was not provided with any independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of Cornell or GEO, nor did it make any physical inspection of the properties or assets of Cornell or GEO. BofA Merrill Lynch did not evaluate the solvency or fair value of Cornell or GEO under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Merrill Lynch assumed, at GEO’s direction, that the merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on Cornell, GEO or the contemplated benefits of the merger. BofA Merrill Lynch also assumed, at GEO’s direction, that the merger would qualify for federal income tax purposes as a reorganization under the provisions of Section 368(a) of the Code.

 

BofA Merrill Lynch expressed no view or opinion as to any terms or other aspects of the merger, other than the merger consideration to the extent expressly specified in its opinion, including, without limitation, the form or structure of the merger, the form or structure of the merger consideration or any election, limitations or proration procedures relating to the merger consideration. BofA Merrill Lynch’s opinion was limited to the fairness, from a financial point of view, to GEO of the merger consideration to be paid in the merger and no opinion or view was expressed with respect to any consideration received in connection with the merger by the holders of any class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration. Furthermore, no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to GEO or in which GEO might engage or as to the underlying business decision of GEO to proceed with or effect the merger. BofA Merrill Lynch did not express any opinion as to what the value of GEO common stock actually would be when issued or the prices at which GEO common stock or Cornell common stock would trade at any time, including following announcement or consummation of the merger. BofA Merrill Lynch also did not express any view or opinion with respect to, and relied, with GEO’s consent, upon the assessments of GEO’s management regarding, legal, regulatory, accounting, tax or similar matters relating to Cornell, GEO or the merger as to which BofA Merrill Lynch understood that GEO had obtained such advice as it deemed necessary from qualified professionals. In addition, BofA Merrill Lynch expressed no opinion or recommendation as to how any shareholder should vote or act in connection with the merger or any related matter.

 

BofA Merrill Lynch’s opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to BofA Merrill Lynch as of, the date of its opinion. It should be understood that subsequent developments may affect its opinion, and BofA Merrill Lynch does not have any obligation to update, revise or reaffirm its opinion. The issuance of BofA Merrill Lynch’s

opinion was approved by BofA Merrill Lynch’s Americas Fairness Opinion Review Committee. Except as described above, GEO imposed no other limitations on the investigations made or procedures followed by BofA Merrill Lynch in rendering its opinion.

 

GEO has agreed to pay BofA Merrill Lynch for its services as financial advisor to GEO in connection with the merger an aggregate fee of $3.75 million, a portion of which was payable upon execution of the merger agreement and $3.375 million of which is contingent upon the completion of the merger. GEO also has agreed to reimburse BofA Merrill Lynch for its expenses, including fees and disbursements of BofA Merrill Lynch’s counsel, incurred in connection with BofA Merrill Lynch’s engagement and to indemnify BofA Merrill Lynch, any controlling person of BofA Merrill Lynch and each of their respective directors, officers, employees, agents and affiliates against specified liabilities, including liabilities under the federal securities laws.

 

BofA Merrill Lynch and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of business, BofA Merrill Lynch and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of GEO, Cornell and certain of their respective affiliates.

 

BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to GEO and have received or in the future may receive compensation for the rendering of these services, including (i) having acted as joint book runner on certain debt offerings of GEO and as dealer manager for a tender offer undertaken by GEO for certain of its outstanding notes, (ii) having acted or acting as lender under various credit facilities of GEO and (iii) having provided or providing certain treasury management services to GEO. In addition, BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to Cornell and have received or in the future may receive compensation for the rendering of these services, including having acted or acting as syndication agent for, and/or as lender under, various credit and leasing facilities of Cornell.

 

BofA Merrill Lynch is an internationally recognized investment banking firm which is regularly engaged in providing financial advisory services in connection with mergers and acquisitions. GEO selected BofA Merrill Lynch to act as GEO’s financial advisor in connection with the merger on the basis of BofA Merrill Lynch’s experience in transactions similar to the merger, its reputation in the investment community and its familiarity with GEO and its business.

 

Summary of Financial Analyses

 

In connection with rendering their respective opinions, GEO’s financial advisors performed certain financial, comparative and other analyses as summarized below. This summary is not a complete description of the financial analyses performed and factors considered in connection with such opinions. In arriving at their respective opinions, GEO’s financial advisors did not ascribe a specific range of values to shares of GEO common stock or Cornell common stock but rather made their respective determinations as to the fairness, from a financial point of view, to GEO of the consideration to be paid by GEO in the merger on the basis of various financial and comparative analyses taken as a whole. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.

 

In arriving at their respective opinions, GEO’s financial advisors did not attribute any particular weight to any single analysis or factor considered but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered and in the context of the circumstances of the particular transaction. Accordingly, the analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a

misleading or incomplete view of the process underlying such opinions. The fact that any specific analysis has been referred to in the summary below is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

 

In performing their analyses, GEO’s financial advisors considered industry performance, general business and economic conditions and other matters existing as of April 18, 2010, many of which are beyond the control of GEO, Cornell or any other parties to the merger. None of GEO, Cornell or GEO’s financial advisors or any other person assumes responsibility if future results are different from those discussed, whether or not any such difference is material. Any estimates contained in these analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or necessarily reflect the prices at which businesses or securities may actually be sold or acquired. Accordingly, the assumptions and estimates used in, and the results derived from, the following analyses are inherently subject to substantial uncertainty.

 

The following is a summary of the material financial analyses reviewed with GEO’s board of directors by GEO’s financial advisors at GEO’s board meeting on April 18, 2010. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of such financial analyses. Barclays Capital and BofA Merrill Lynch performed separate financial analyses with respect to Cornell and GEO on a standalone basis and jointly performed certain pro forma financial analyses as more fully described below. For purposes of the financial analyses summarized below, the term “implied merger consideration” refers to the implied per share value of (i) the all-stock merger consideration of $24.91 based on 1.3 shares of GEO common stock and GEO’s closing stock price of $19.16 as of April 16, 2010 (the last trading day prior to execution of the merger agreement) and (ii) the all-cash consideration of $25.16 based on 1.0 share of GEO common stock and GEO’s closing stock price of $19.16 as of April 16, 2010 plus $6.00. Also for purposes of the financial analyses summarized below, the term “merger exchange ratios” refers to the exchange ratio of 1.3 and the implied all-cash exchange ratio of 1.31 based on the implied value of the all-cash merger consideration of $25.16 divided by GEO’s closing stock price on April 16, 2010.

 

Barclays Capital Financial Analyses

 

Cornell Selected Company Analysis.  Barclays Capital reviewed and compared specific financial and operating data relating to Cornell with the following two selected correctional, detention, educational, rehabilitation and treatment services providers:

 

 

No selected company is identical to Cornell. Accordingly, Barclays Capital believes that purely quantitative analyses are not, in isolation, determinative and that qualitative judgments concerning differences in the business, financial and operating characteristics and prospects of Cornell and the selected companies that could affect public trading values also are relevant.

 

Barclays Capital calculated, among other things, the ratio of each company’s enterprise value to its calendar year 2010 estimated earnings before interest, taxes, depreciation and amortization, or EBITDA. Enterprise value generally was obtained by adding short-term and long-term debt to the sum of the market value of common equity, calculated using a fully diluted share count assuming the treasury stock method, and the book value of any minority interest, and subtracting cash and cash equivalents. These calculations were performed based on publicly available financial data and closing stock prices as of April 16, 2010, the last trading date prior to execution of the merger agreement. Barclays Capital then applied a range of selected multiples of calendar year 2010 estimated EBITDA derived from the selected companies to corresponding data of Cornell based on the adjusted Cornell forecasts. This

analysis indicated the following implied per share equity value reference range for Cornell, as compared to the implied merger consideration:

 

 

Barclays Capital also calculated an implied exchange ratio reference range by dividing the high and low ends of the implied per share equity value reference range for Cornell described above by GEO’s closing stock price of $19.16 as of April 16, 2010. This indicated the following implied exchange ratio reference range, as compared to the merger exchange ratios:

 

 

Cornell Selected Transactions Analysis.  Barclays Capital reviewed and compared the purchase prices and financial multiples paid in the following nine selected transactions involving correctional, detention, educational, rehabilitation and treatment services providers:

 

 

No selected transaction or company is identical to Cornell or the merger. Accordingly, Barclays Capital believes that purely quantitative analyses are not, in isolation, determinative and that qualitative judgments concerning differences in the characteristics of the selected transactions and the merger that could affect the acquisition values of the selected target companies and Cornell also are relevant.

 

Barclays Capital calculated transaction values in the selected transactions as the ratio of the target company’s enterprise value, based on the consideration payable in the selected transaction, to its latest 12 months EBITDA based on publicly available information at the time of announcement of the relevant transaction. Barclays Capital then applied a range of selected multiples of latest 12 months EBITDA derived from the selected transactions to Cornell’s calendar year 2009 EBITDA based on Cornell’s public filings and to Cornell’s calendar year 2010 estimated EBITDA based on the adjusted Cornell forecasts. This analysis indicated the following implied per share equity value reference ranges for Cornell, as compared to the implied merger consideration:

 

 

Barclays Capital also calculated implied exchange ratio reference ranges by dividing the high and low ends of the implied per share equity value reference ranges for Cornell described above by GEO’s closing stock price of

$19.16 as of April 16, 2010. This indicated the following implied exchange ratio reference ranges, as compared to the merger exchange ratios:

 

 

Cornell Discounted Cash Flow Analysis.  Barclays Capital performed a discounted cash flow analysis of Cornell to calculate the estimated present value of the standalone future cash flows of Cornell. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors. To calculate an implied reference range for Cornell using the discounted cash flow method, Barclays Capital added (i) Cornell’s projected after-tax unlevered free cash flows for fiscal years 2010 through 2014 based on the adjusted Cornell forecasts to (ii) the residual or terminal value of Cornell at the end of the forecast period, and discounted such amounts to present value using a range of selected discount rates. The after-tax unlevered free cash flows were calculated by taking the tax-affected earnings before interest and tax expense, adding back non-cash depreciation and amortization, subtracting capital expenditures and adjusting for changes in working capital. The terminal value of Cornell was estimated by applying a selected range of terminal value multiples of 7.5x to 8.5x to Cornell’s fiscal year 2014 estimated EBITDA. The cash flows and terminal values were then discounted to present value using discount rates ranging from 9.0% to 11.0%. This analysis indicated the following implied per share equity value reference range for Cornell, as compared to the implied merger consideration:

 

 

Barclays Capital also calculated an implied exchange ratio reference range by dividing the high and low ends of the implied per share equity value reference range for Cornell described above by GEO’s closing stock price of $19.16 as of April 16, 2010. This indicated the following implied exchange ratio reference range, as compared to the merger exchange ratios:

 

 

Other Factors.  Barclays Capital also considered, for informational purposes, certain other factors, including:

 

 

BofA Merrill Lynch Financial Analyses

 

Cornell Selected Companies Analysis.  BofA Merrill Lynch reviewed publicly available financial and stock market information for Cornell and the following three selected correctional, detention, educational, rehabilitation and treatment services providers:

 

 

 

BofA Merrill Lynch reviewed, among other things, enterprise values of the selected companies, calculated as equity values based on closing stock prices on April 16, 2010, plus debt, less cash and other adjustments, as a multiple of calendar years 2010 and 2011 estimated EBITDA. BofA Merrill Lynch also reviewed per share equity values, based on closing stock prices on April 16, 2010 (the last trading day prior to execution of the merger agreement), of the selected companies as a multiple of calendar year 2010 estimated earnings per share, referred to as EPS. BofA Merrill Lynch then applied a range of selected multiples of calendar years 2010 and 2011 estimated EBITDA and calendar year 2010 estimated EPS derived from the selected companies to corresponding data of Cornell. Estimated financial data of the selected companies were based on publicly available research analysts’ estimates, public filings and other publicly available information. Estimated financial data of Cornell were based on the adjusted Cornell forecasts. This analysis indicated the following implied per share equity value reference ranges for Cornell, as compared to the implied merger consideration: