US Search.com, First American Unit Will Merge

A collapsed Southland dot-com stock found a new backer Monday.

Los Angeles-based US Search.com Inc., which provides employee screening services and finds long-lost relatives for consumers, said it agreed to be merged into a new firm to be formed with a unit of title insurance giant First American Corp.

The deal would create a bigger player in the sleuthing business, which has gotten a boost as more companies have sought to screen workers’ backgrounds since the Sept. 11 terrorist attacks.

Santa Ana-based First American said it would combine its screening information group with US Search.com, creating First Advantage Corp.

First American would own 80% of the new company. US Search.com’s shareholders would own the rest, if they agree to swap their shares for new stock. The business, with expected annual revenue of about $160 million to start, will apply for a listing on Nasdaq.

First American wouldn’t issue stock as part of the deal but expects to inject capital into the firm, said Chief Financial Officer Thomas A. Klemens.

For US Search.com, the deal would provide a parent with deep pockets. First American is expected to have revenue of about $4.4 billion this year, most of it from title services.

Over the last two years, First American also has been building its screening information business, which the company expects to help it offset some of the cyclical nature of the real estate business, Klemens said.

First American sees potential to cross-sell products, including consumer credit reports, to US Search.com clients, he said. US Search.com has ranked third in visitors among directory and local-guide sites, according to Nielsen/NetRatings.

US Search.com hasn’t been profitable since it went public in 1999, but sales have risen sharply in recent quarters. Third-quarter sales were $8.4 million.

Excluding one-time noncash charges in the quarter, the company said its loss narrowed to $765,000, or 1 cent a share, from $2.7 million, or 15 cents, a year earlier.

It isn’t clear what the new First Advantage shares might be worth, but Klemens said the firm “will be profitable from the get-go.” He said First American conservatively expects the business to add 2 cents a share to the parent’s earnings in 2004.

US Search.com Chief Executive Brent Cohen would be president of the new firm. John W. Long, head of First American’s screening unit, would be CEO.

First Advantage would be headquartered in St. Petersburg, Fla., where First American’s unit now is based. But Cohen said he would remain in Los Angeles, and that there were no plans to relocate the 110 employees in the L.A. office.

US Search.com shares closed unchanged at 79 cents on Nasdaq. First American shares rose 37 cents to $22.37 on the New York Stock Exchange.