Data Processing Resources Corp., in its most ambitious expansion to date, said Wednesday it will merge with a North Carolina company in a stock deal valued at $85 million.
The deal gives Newport Beach-based Data Processing, a temporary-staffing firm that specializes in programmers and computer systems engineers, a critical foothold in the East Coast market.
The addition of closely held Systems & Programming Consultants Inc. of Charlotte, which had about $50 million in revenue the past 12 months, will increase Data Processing's annual revenue by about one-third.
Systems & Programming "enjoys an excellent reputation in its markets for outstanding client service, the quality of the work of its consultants and the dedication it has to its employees," said David M. Connell, Data Processing's president and chief operating officer, in a statement.
Systems & Programming employs about 500 consultants and manages eight offices in the Southeast. Its customers include Charlotte-based NationsBank of Texas N.A., Wachovia Operational Services Corp. and GTE Data Services Inc.
By comparison, Data Processing has about 1,900 consultants in 17 offices in the U.S. and four international recruiting offices. Through the nine months ended April 30, profits soared 80%, to $7.87 million, or 68 cents a share, on a 94% gain in sales, to $146 million. Much of that growth has come through acquisitions.
Investors apparently liked the deal, bidding up Data Resources' shares by $1.25, to $32.63 in Nasdaq trading Wednesday.
Analysts believe the earnings potential of the combined companies is great because computer programmers and systems engineers are in short supply.
The booming U.S. economy has prompted many companies to expand their computer systems, while many other firms are rushing to upgrade older computers so they don't malfunction on Jan. 1, 2000. Older machines use only two digits for the year, and those machines could register 2000 as 1900.
Data Processing is one of the largest publicly held companies in Orange County that is run by a woman. It was founded in 1985 by Mary Ellen Weaver, a self-described "crummy typist" who worked her way up the management chain at several temporary-services agencies.
She eventually gained half ownership in Data Processing and today is its chairman and chief executive. The company went public in March 1996, raising $35.5 million. Today, Weaver owns 21% of Data Processing, a stake worth $75.4 million.
Under terms of the definitive agreement announced Wednesday, the owners of privately held Systems & Programming will get 2.7 million to 3 million Data Processing shares valued at $85 million.
The boards of both companies have approved the transaction, but the deal still requires clearance by the Securities and Exchange Commission.
The merger will be treated as a tax-free reorganization and accounted for as a pooling of interests. It is expected to be completed in the fall.