Corrections Corporation of America and CCA Prison Realty Trust to Merge In $4 Billion Transaction; Companies Acquire U.S. Corrections Corporation

Apr 20, 1998, 01:00 ET from Corrections Corporation of America

    NASHVILLE, Tenn., April 20 /PRNewswire/ -- Corrections Corporation of
 America (NYSE:   CCA), a prison management company, and CCA Prison Realty Trust
 (NYSE:   PZN), a prison real estate investment trust (REIT), announced today
 that they have signed a definitive agreement to merge.  Under the terms of the
 agreement, holders of CCA common stock will receive .875 share of PZN common
 stock for each common share of CCA owned.
     When completed, the merged companies will operate as a REIT with
 approximately $4 billion in total market capitalization, based on current
 market prices.  Doctor R. Crants, chairman of both CCA and PZN, will be
 chairman and chief executive officer of the combined company.  Once closed,
 the CCA/PZN transaction is expected to be immediately accretive to the REIT's
 FFO per share.
     The merger has been approved unanimously by the independent board members
 of CCA and PZN.  Consummation is planned for January 1999, subject to
 customary conditions, including approvals by regulatory and governmental
 agencies and the shareholders of both companies.
     In addition, CCA and PZN also announced that they have acquired the assets
 of U.S. Corrections Corporation (USCC), a privately held prison management
 company based in Louisville, Kentucky.  CCA acquired USCC's management
 contracts to operate correctional and detention facilities for approximately
 $10 million in cash.  Immediately after the CCA purchase, USCC was merged into
 PZN for approximately $147 million in cash plus the assumption of
 approximately $108 million of debt.
     "Each of these transactions, the merger and the acquisition, is
 significant," said Crants.  "They represent unprecedented historic and
 economic value for our companies.  They exemplify our innovation and
 flexibility while demonstrating our commitment to enhancing the interest of
 our respective shareholders.
     "The USCC acquisition reflects the relative strengths of CCA and PZN.
 USCC had the largest collection of prison beds owned by a privately held
 company, all of which are a healthy addition to PZN's portfolio.  With USCC,
 PZN increased its owned beds by 43%, from 12,214 to 17,489.  More importantly,
 with this $255 million purchase PZN has met its full-year 1998 asset
 acquisition objective and did so leaving its considerable CCA facility
 pipeline intact.  The USCC transaction is expected to be immediately accretive
 to PZN's FFO per share.
     "USCC's contracts and geographic diversity complement CCA's existing book
 of management business by adding eight facilities and two new states to its
 service area.  We welcome their operations into our company," Crants
     "The merger of CCA and PZN will allow the respective shareholders of both
 companies to benefit from every type of private sector/public sector
 partnership:  facilities owned and managed by CCA, those owned by government
 and managed by CCA, those owned by PZN and managed by CCA, and those owned by
 PZN and managed by government.  We are enthusiastic about the possibilities
 for growth in all of these areas.
     "The resulting company structure will combine the tax and dividend
 benefits of a REIT with the high growth prospects of a quality growth company
 to produce an exceptional investment opportunity."
     USCC Acquisition
     The former USCC properties that PZN bought include four in Kentucky,
 one in Ohio and two in North Carolina.  The North Carolina prisons currently
 are under construction, and two of the Kentucky facilities are being expanded
 and upgraded to medium security.  The Ohio facility is a jail managed by the
 local sheriff, making it the first REIT owned, government operated facility in
 history.  Combined, the facilities PZN acquired house 5,275 beds.
     The management contracts purchased by CCA include the four PZN-acquired
 operating facilities in Kentucky, as well as one each in Florida and Texas
 that are owned by government.  CCA also purchased the right to manage the
 two North Carolina prisons that currently are under construction.  Total beds
 operating or being built under the management agreements equal 5,743.
     CCA/PZN Merger Benefits
     The merger of CCA and PZN combines their growth rates to create a REIT
 with the ability to expand funds from operation, or FFO, at a high rate on a
 sustained basis.
     The proposed structure gives shareholders of both companies the benefit of
 dividends associated with PZN's status as a REIT.  In addition to PZN's
 regular dividend, during the fourth quarter of 1999, PZN will pay out CCA's
 accumulated earnings and profits in a special, one-time dividend expected to
 exceed $2.00 per share.
     The transaction will give the combined company a stronger balance sheet.
 It is expected to reduce overall cost of capital, as well as enhance liquidity
 and public float.
     Significant marketing synergies are expected in the development of new
 business.  Combining the resources of CCA and PZN will heighten their
 effectiveness in presenting comprehensive proposals to government for all
 facets of the business:  designing, building, owning, leasing and managing
 secure facilities.
     Organizational Structure of Merged Companies
     After the merger, management of the REIT's facilities and contracts will
 be undertaken by three newly formed private companies, all operating under the
 name of Corrections Corporation of America.
     For existing contracts in facilities not owned by PZN or CCA,
 two third-party service subsidiaries will be formed.  One subsidiary will
 manage the adult prison contracts and the other will manage jail and detention
 facility contracts.  PZN will have 95% of the economic interest in each
 subsidiary, and the remaining 5% will be held by investors and the management
 and employees of each subsidiary.
     For contracts in facilities currently owned by PZN and CCA, as well as for
 all future facilities, a separate management company will be formed.  PZN is
 expected to have 9.5% economic interest in it, with the balance held by
 investors and the management and employees of that company.  The
 investor/management group will agree to pay PZN in installments for the right
 to manage its properties.
     "While the REIT rules are complex," Crants said, "in essence PZN will move
 forward as the publicly traded investment vehicle.  'New' CCA will continue to
 operate as its management company with the same name, same management team,
 same reputation and same industry leadership position."
     Exchange Terms
     Under the terms of the CCA/PZN merger agreement, CCA will merge with and
 into PZN in a tax-free reorganization.  The exchange ratio for CCA common
 shares will be fixed at .875 PZN share for each CCA share, with no adjustment
 mechanism for changes in stock price.  It is expected that most outstanding
 CCA stock options and all deferred stock awards will be fully vested and
 converted into CCA stock just prior to closing, then converted at the exchange
 ratio into PZN shares.
     Shares in CCA's ESOP also will be converted into PZN stock at the exchange
 ratio.  It is anticipated that those shares then will be transferred into a
 newly formed 401(k) Plan for employees.
     J.C. Bradford & Co. has acted as financial advisor for PZN in its
 consideration of the proposed merger, and Stephens Inc. has acted as financial
 advisor for CCA.
     CCA manages prisons and other correctional institutions for governmental
 agencies.  The company is the industry leader in private sector corrections
 with 62,487 beds in 77 facilities under contract in the U.S., Puerto Rico,
 Australia and the United Kingdom.  CCA's full range of services includes
 finance, design, construction and management of new or existing facilities, as
 well as long-distance inmate transportation.
     PZN acquires and owns correctional and detention facilities from both
 private prison managers and governmental entities.  The company has elected to
 be treated as a real estate investment trust under the Internal Revenue Code.
 PZN currently owns 20 facilities in nine U.S. states.
     This press release contains forward-looking statements that involve
 various risks and uncertainties.  Actual results could differ materially from
 those contained in these forward-looking statements due to certain factors,
 including business and economic conditions and availability of financing.
 These and other risks and uncertainties are detailed in the company's reports
 filed with the SEC.

SOURCE Corrections Corporation of America