Industrial Staffing Report: June 20, 2019

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Command Center plans merger deal with Hire Quest

Command Center Inc. (NASD: CCNI), a Colorado-based industrial staffing firm, will acquire industrial staffing provider Hire Quest Holdings LLC. The deal calls for Command Center to issue 9.8 million common shares to Hire Quest owners; in turn, that will give Hire Quest shareholders 68% ownership of Command Center's 14.5 million shares in place after the deal.

Hire Quest CEO Rick Hermanns, who will serve as CEO of the combined entity, will own approximately 39% of Command Center. 

In addition, Command Center would change its name to Hire Quest Inc. The company also plans a tender offer to buy back 1.5 million Command Center shares at $6 a share.

The deal is expected to close in the second quarter, but shareholder approval is still required.

“We are a solid organization with a proven ability to generate cash and effectively deploy capital,” Rick Coleman, Command Center’s current president and CEO Rick Coleman stated in the firm’s fourth-quarter earnings announcement. “Gaining the additional scale from the pending merger and operating from a more profitable franchise model, we will have an ecosystem of franchises that incentivizes improved performance and maximizes results for all stakeholders.

Hire Quest operates as Trojan Labor and Acrux Staffing; it provides blue-collar, light industrial and administrative staffing. It operates its business primarily on a franchise model and Command Center expects to convert its branches to independent franchises post-transaction; as a result, Command Center expects its revenue to decrease but its operating margins and profitability to increase.

Hire Quest has 93 branches in 20 states and Command Center counts 67 field offices in 22 states. Command Center began trading on Nasdaq last year after settling a proxy battle with Ephraim Fields of Echo Lake Capital.

The transaction is the culmination of the strategic review process initiated by Command Center’s board, according to Rick Coleman, Command Center’s current president and CEO. “During this review, we identified an opportunity to combine with Hire Quest, creating immediate scale and allowing us to transition our existing branches to a franchise model,” Coleman said. “By modeling Hire Quest’s success as a franchise operator, we will create a system that is more customer- and employee-centric, more decentralized, and one in which local franchise owners are incentivized to achieve maximum results.”

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