LONDON, UK / ACCESSWIRE / July 14, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for leading provider of facility solutions, ABM Industries Inc. (NYSE: ABM), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=ABM. The Company entered into definitive agreement to acquire GCA Services Group from affiliates of Thomas H. Lee Partners, L.P. and Goldman Sachs Merchant Banking Division on July 12, 2017, for an aggregate consideration of $1.25 billion in cash and stock. For immediate access to our complimentary reports, including today's coverage, register for free now at:

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Details of the transaction

As per the agreement, ABM will acquire GCA for $1.25 billion, out of which $851 million is in cash and remaining $399 million in shares of ABM's common stock. This will be subject to customary adjustments for working capital and net debt.

The transaction is still subject to customary regulatory conditions but is expected to close by September 2017. It is projected that ABM will incur approximately $70 million in one-time, transaction, synergy, and integration related costs.

ABM plans to fund this deal through its amended revolving credit facility, in addition to a five-year amortizing term loan. JPMorgan Chase Bank, N.A. and BofA Merrill Lynch are expected to provide the financing for the transaction.

After the closing of the deal, affiliates of Thomas H Lee Partners L.P. and Goldman Sachs' merchant banking division will own about 14% of ABM's outstanding shares.

An important thing to note is that there is no major change in the Company's fiscal year outlook. Although some changes in certain metrics such as amortization expense and interest expense are expected after closing due to the large size of the transaction.

Acquisition aligns with ABM's Vision 2020 strategy for long-term growth

With regard to the deal, Scott Salmirs, President and Chief Executive Officer of ABM Industries, stated that this acquisition will boost ABM's 2020 Vision by creating a broader platform of services and distinguishing ABM as an industry-focused solutions provider. ABM aims to gain insights from GCA, which is looked upon as an industry leader with exceptional talent. He believes that GCA's client-centric goals and philosophies align closely with those of ABM. In fact, he is positive that the acquisition would create considerable value for ABM's clients, employees as well as shareholders.

There are multiple ways that the deal is expected to benefit ABM:

  • Increased presence in the education market and commercial industry: Both companies have complementary organizational structures by industry group. And this combined arrangement will strengthen ABM's 2020 Vision of evolving from a facility solutions provider managed by service line into an industry-focused organization.

  • Increase in profitability: GCA has shown continuous growth in revenues and profits due to its industry-focused operational strategies. Therefore, ABM expects this acquisition to boost its overall profit margin and achieve its Vision 2020 goal of long-term profitable growth.

  • Enhanced capabilities for clients: The combination of ABM's standard operating practices and GCA's best-in-class operations will lead to improved capabilities for clients and scope for cross-selling of ABM's Technical Solutions and specialty engineering services.

  • Cost synergies: The deal is expected to produce cost synergies in overhead and procurement, which will lead to greater efficiencies in shared services, IT, and other such areas.

Deal will help GCA get a greater reach

Bob Norton, Chairman, President, and Chief Executive Officer of GCA expressed his excitement on joining the ABM family. He envisions that this deal will allow GCS to better serve its clients with more services and greater reach. He also believes that this combination will lead to significant long-term value for all stakeholders.

Financial implications of the deal

ABM expects a revenue contribution of about $1.1 billion and adjusted EBITDA of around $100 million after its first year of ownership of GCA. Out of this, the Company is looking at incremental revenue of $600 million from the Education industry group itself. In the second year of ownership, ABM is expecting annualized, run rate cost synergies of $20 million to $30 million.

However, ABM will also acquire total debt of approximately $1.5 billion, and total debt to pro-forma lender-adjusted EBITDA of around 4.0x, though it is not expected to impact ABM's current dividend payment policy.

About ABM Industries

ABM is a leading provider of facility solutions with revenues of approximately $5.1 billion and over 100,000 employees in 300+ offices throughout the United States and various international locations. ABM Industries, which operates through its subsidiaries, was founded in 1909. ABM's capabilities include janitorial, electrical & lighting, energy solutions, facilities engineering, HVAC & mechanical, landscape & turf, mission critical and parking solutions.

About GCA

GCA is a leading provider of facility services in the education and commercial industries, specializing in facilities maintenance, janitorial services, grounds management, vehicle services and outsourced workforce solutions. GCA, headquartered in Cleveland, employs over 37,000 employees in 46 states, the District of Columbia, and Puerto Rico.

Last Close Stock Review

On Thursday, July 13, 2017, the stock closed the trading session at $42.73, climbing 2.03% from its previous closing price of $41.88. A total volume of 283.86 thousand shares has exchanged hands. ABM Industries' stock price surged 3.21% in the last one month, 6.27% in the past six months, and 14.74% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 4.63%. The stock is trading at a PE ratio of 26.94 and has a dividend yield of 1.59%. The stock currently has a market cap of $2.42 billion.

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