Monday, April 19, 2010

Private Prison Operator Cornell Companies Agrees To Acquisition By Competitor Geo Group

Long time readers know that Bill Ackman's Pershing Square pitched Cornell Companies' competitor Corrections Corp of America (CXW) last fall (see pitch here). Today, one of Correction Corp's biggest direct competitors Cornell Companies agreed to be taken out by another comp, Geo Group, for a 35% premium, further consolidating the private prison industry (link to press release). TILB views this as very positive for the private prison industry as it further improves the oligopolistic characteristics of an industry that already has reasonable competitive dynamics.

While municipal financial difficulties are a cyclical headwind to any and all budgetary items, our view is the secular tailwind is intact as their scale, expertise and flexibility make them an attractive alternative to states investing huge capital in their own public systems.