Aligns with 2020 Vision of Long-Term Profitable
Growth
Increases Annual Revenues by Approximately $1.1
Billion and Adjusted EBITDA by Approximately $100 Million
Estimated Cost Synergies of Approximately $20
Million to $30 Million
ABM (NYSE:ABM) (“the Company”), a leading provider of facility
solutions, today announced it has entered into a definitive
agreement to acquire GCA Services Group (“GCA”) from affiliates of
Thomas H. Lee Partners, L.P. and Goldman Sachs Merchant Banking
Division for approximately $1.25 billion in cash and stock.
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. With over 37,000 employees in 46
states, the District of Columbia, and Puerto Rico, GCA is
headquartered in Cleveland, OH.
Scott Salmirs, President and Chief Executive Officer of ABM
Industries, commented, “This transformative and accretive
acquisition will accelerate our 2020 Vision by creating a broader
platform upon which we can grow profitably and further distinguish
ABM as an industry-focused solutions provider. We look forward to
gaining insights from GCA, a well-established industry leader with
top talent. GCA’s client-centric goals and philosophies align
closely with those of ABM, and we are excited about the value this
combination will bring to our clients, our employees and our
shareholders.”
Bob Norton, Chairman, President and Chief Executive Officer of
GCA, commented, “We are excited to be joining the ABM family, which
will allow us to better serve our clients with more services and
greater reach. We believe our combination with a company that
shares our vision for profitable growth will lead to significant
long-term value for all stakeholders.”
Strategic Rationale
The acquisition aligns with the core principles of ABM’s 2020
Vision strategy of achieving long-term profitable growth:
- Industry-Focused Approach: The
Company and GCA have complementary organizational structures by
industry group and the combination will enhance ABM’s presence in
the Education market and Commercial industry. The combined
expertise in these areas will reinforce ABM’s 2020 Vision evolution
from a facility solutions provider managed by service line to an
industry-focused organization.
- Profitable Growth: GCA has a
demonstrated track record of longstanding revenue growth and
profitability driven by its industry-focused operational
strategies. The acquisition is expected to increase the overall
margin profile of ABM and to solidify the Company’s 2020
Vision-driven, client-centric structure and strategy for long-term
profitable growth.
- The ABM Way: The transaction
will provide a broader platform for ABM to implement its standard
operating practices, which, when combined with the best-in-class
operations of GCA, will enhance the Company’s capabilities for its
clients, and accelerate cross-selling of its Technical Solutions
and specialty engineering services.
- Valuable Synergies: The
acquisition is expected to produce cost synergies in overhead and
procurement, while also enabling greater efficiencies in areas such
as shared services and IT.
Financial Highlights
The acquisition of GCA is expected to accelerate ABM’s ability
to enhance long-term shareholder value. While ABM intends to
provide greater detail surrounding the long-term financial impact
of the transaction after the acquisition closes, ABM expects:
- Revenue contribution of approximately
$1.1 billion and adjusted EBITDA of approximately $100 million,
respectively, after the first full year of ownership.
- Revenue increase of approximately $600
million within the Education industry group, with the remaining
$500 million to be allocated to other key industry groups during
the integration process.
- Annualized, run rate cost synergies of
approximately $20 million to $30 million, which are expected to be
realized by the second full year of ownership.
- Total debt, including standby letters
of credit, of approximately $1.5 billion, and total debt to
proforma lender-adjusted EBITDA of approximately 4.0x, as
calculated under the Company’s amended credit agreement, which is
not expected to impact ABM’s current dividend payment policy.
Transaction Details
Under the terms of the agreement, ABM will acquire GCA for $851
million in cash and $399 million in shares of ABM common stock
subject to customary adjustments for working capital and net
debt.
The transaction is expected to close by September 2017, subject
to customary closing conditions including required regulatory
approvals. ABM expects to incur approximately $70 million in
one-time, transaction-, synergy-, and integration-related
costs.
Following the closing of the transaction, affiliates of Thomas
H. Lee Partners, L.P. and Goldman Sachs Merchant Banking Division
will own, in the aggregate, approximately 14% of ABM’s outstanding
shares and will enter into a shareholders agreement with the
Company providing for, among other things, customary standstill and
voting obligations, transfer restrictions and registration
rights.
Josh Bresler, Managing Director of Thomas H. Lee Partners, L.P.,
stated, “We would like to thank Bob Norton, the entire GCA
management team and the over 37,000 GCA employees for a tremendous
partnership. GCA is an incredible company with a proven track
record of operating performance, safety and specialty market
expertise. We are excited about the growth prospects of GCA as an
important part of ABM, and look forward to benefiting from the
combined company’s future upside.”
Chris Crampton, Managing Director of Goldman Sachs Merchant
Banking Division, said, “The combined company will create a market
leader in facilities services, and will enable management to offer
its customers additional locations, services, expertise and
resources.” Mr. Crampton continued, “We look forward to supporting
Scott and the ABM management team as they continue to successfully
execute on their 2020 Vision.”
Financing
ABM plans to fund the cash portion of the purchase price and
transaction expenses via its amended revolving credit facility, in
addition to a five-year amortizing term loan. JPMorgan Chase Bank,
N.A. and BofA Merrill Lynch have committed to provide the financing
for the transaction.
Advisors
J.P. Morgan Securities LLC is serving as exclusive financial
advisor to ABM. Jones Day and Davis, Polk and Wardwell are serving
as its legal advisors.
Goldman Sachs and Kirkland & Ellis LLP are serving as GCA’s
financial and legal advisors, respectively.
Fiscal Year Outlook
There are no changes to the Company’s fiscal year outlook at
this time. Upon closing, the Company anticipates changes in certain
metrics, such as amortization expense and interest expense, given
the size of the transaction. The Company also expects to incur
certain, one-time transaction, synergy, and integration-related
expenses, following the closing of the transaction.
Conference Call
ABM will host a conference call today at 8:30 AM (ET) to discuss
the transaction. The live conference call can be accessed via audio
webcast under the "Events & Presentations" section of ABM's
Investor Relations website, located at investor.abm.com, or by
dialing (877) 451-6152 approximately 15 minutes prior to the
scheduled time. A supplemental presentation will be available on
the Company's website.
A replay will be available approximately two hours after the
recording through July 19, 2017 and can be accessed by dialing
(844) 512-2921 and access ID # 13665707. An archive will also be
available on the ABM website for 90 days.
ABOUT ABM
ABM (NYSE: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’s comprehensive capabilities include
janitorial, electrical & lighting, energy solutions, facilities
engineering, HVAC & mechanical, landscape & turf, mission
critical solutions and parking, provided through stand-alone or
integrated solutions. ABM provides custom facility solutions in
urban, suburban and rural areas to properties of all sizes – from
schools and commercial buildings to hospitals, data centers,
manufacturing plants and airports. ABM Industries Incorporated,
which operates through its subsidiaries, was founded in 1909. For
more information, visit www.abm.com.
ABOUT GCA SERVICES GROUP, INC.
GCA Services Group, Inc. is a leading national provider of
quality facility services, including janitorial/custodial services,
contamination control for cleanroom manufacturing, facilities
operations and maintenance, grounds and athletic field management,
diversified staffing, and more. With over 37,000 employees, GCA
serves over 930 clients in a variety of sectors, including K-12
schools, higher education, corporate office buildings,
manufacturing, high-tech, bio-pharmaceutical, nuclear power,
defense, energy & utilities, warehouses and distribution
centers, the rental car market, and others. For more information,
please visit www.gcaservices.com or follow GCA on Twitter,
@gcaservices.
ABOUT THOMAS H. LEE PARTNERS, L.P.
Thomas H. Lee Partners, L.P. (“THL”) is one of the world’s
oldest and most experienced private equity firms. Founded in 1974,
THL has raised over $22 billion of equity capital and invested in
more than 140 portfolio companies with an aggregate value of over
$150 billion. THL invests in growth oriented businesses,
headquartered primarily in North America, across four sectors:
Business & Financial Services, Consumer & Retail,
Healthcare, and Media, Information Services & Technology. THL
partners with portfolio company management to identify and
implement operational and strategic improvements to accelerate
sustainable revenue and profit growth.
ABOUT GOLDMAN SACHS MERCHANT BANKING DIVISION
Founded in 1869, Goldman Sachs is a leading global investment
banking, securities and investment management firm. The Goldman
Sachs Merchant Banking Division (MBD) is the primary center for the
firm’s long-term principal investing activity. With nine offices
across seven countries, MBD is one of the leading private capital
investors in the world with equity and credit investments across
corporate, real estate, and infrastructure strategies. Since 1986,
the group has invested approximately $180 billion of levered
capital across a number of geographies, industries and transaction
types.
Cautionary Statement under the Private Securities Litigation
Reform Act of 1995
This press release contains both historical and forward-looking
statements addressing the plan of ABM Industries Incorporated
(“ABM” and, together with its subsidiaries, collectively referred
to as “ABM,” “we,” “us,” “our,” or the “Company”) to acquire GCA
Services Group (“GCA”). In this context, we make forward-looking
statements related to future expectations, estimates and
projections that are uncertain, and often contain words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,”
“intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “should,”
“target,” or other similar words or phrases. These statements are
not guarantees of future performance and are subject to known and
unknown risks, uncertainties, and assumptions that are difficult to
predict. For us, particular uncertainties that could cause our
actual results to be materially different from those expressed in
our forward-looking statements include: (1) our ability to
successfully complete the proposed acquisition of GCA, including
satisfying closing conditions; (2) delay in closing the proposed
acquisition of GCA; (3) the occurrence of any event that could give
rise to termination of the merger agreement; (4) risks inherent in
the achievement of cost synergies and the timing thereof; (5) risks
related to the disruption of the proposed acquisition to GCA and
its management; (6) the effect of announcement of the proposed
acquisition on GCA’s ability to retain and hire key personnel and
maintain relationships with clients, suppliers and other third
parties; (7) our ability to successfully integrate GCA if the
proposed acquisition is completed, including whether and to what
extent the proposed acquisition will be accretive and within the
expected timeframe; (8) changes to our businesses, operating
structure, financial reporting structure, or personnel relating to
the implementation of our 2020 Vision strategic transformation
initiative; (9) increases in estimates of ultimate insurance
losses; (10) uncertainty in future cash flows; (11) challenges
preserving long-term client relationships, passing through costs to
clients, responding to competitive pressures, and retaining
qualified personnel; (12) impairment of goodwill and long-lived
assets; (13) changes in immigration laws or enforcement actions or
investigations under such laws; (14) significant delays or
reductions in appropriations for our government contracts; (15)
losses or other incidents at facilities in which we operate; and
(16) liabilities associated with participation in multiemployer
pension plans. The list of factors above is illustrative and by no
means exhaustive. Additional information regarding these and other
risks and uncertainties we face is contained in our Annual Report
on Form 10-K for the year ended October 31, 2016 and in other
reports we file from time to time with the Securities and Exchange
Commission (including all amendments to those reports). We urge
readers to consider these risks and uncertainties in evaluating our
forward-looking statements. We caution readers not to place undue
reliance upon any such forward- looking statements, which speak
only as of the date made. We undertake no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events, or otherwise, except as required by
law.
Use of Non-GAAP Financial Information
The Company has presented, in this press release, an estimate
for GCA’s adjusted EBITDA contribution and total debt to proforma
lender-adjusted EBITDA, which includes an estimate for adjusted
EBITDA related to GCA. Adjusted EBITDA is a non-GAAP financial
measure which represents earnings before interest, taxes,
depreciation, amortization and other adjustments. Lender-adjusted
EBITDA is a non-GAAP financial measure utilized in the financial
covenants contained in the Company’s credit agreement. GCA uses
adjusted EBITDA as a measurement of financial results and as an
indication of the relative strength of operating performance. The
Company's estimate of GCA’s adjusted EBITDA and lender-adjusted
EBITDA are based only on projected financial information available
as of the date hereof. These non-GAAP financial measures are not
intended to replace the presentation of financial results in
accordance with U.S. GAAP. These non-GAAP financial measures may
not be comparable to similar measures used by other companies and
may exclude certain nondiscretionary expenses and reflect other
adjustments. Reconciliations of these forward-looking non-GAAP
financial measures to the most directly comparable GAAP financial
measures are not provided because the Company is unable to provide
such reconciliations without unreasonable effort, due to the
uncertainty and inherent difficulty of predicting the occurrence
and the financial impact of information concerning amounts of
certain items excluded from adjusted EBITDA and lender-adjusted
EBITDA, such as amortization and taxes and items impacting
comparability, which are not determinable on a forward-looking
basis at this time.
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version on businesswire.com: http://www.businesswire.com/news/home/20170712005440/en/
Investor & Media Relations:ABMSusie A. Choi, (212)
297-9721susie.choi@abm.com
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