Johns Lyng Group Expands with Acquisitions of SSKB Strata and Chill-Rite HVAC
JLG (JLG) Share Update August 2024 Friday 2nd
Johns Lyng Group Announces Strategic Acquisitions of SSKB Strata and Chill-Rite HVAC
Johns Lyng Group Limited (ASX: JLG) has announced the acquisition of SSKB Strata and Chill-Rite HVAC, marking a significant step in its growth strategy.
Instant Summary:
- Johns Lyng Group acquires 100% of SSKB Strata and 84% of Chill-Rite HVAC.
- Total upfront aggregate consideration of $57.6 million.
- Acquisitions expected to generate over $45 million in revenue and $9 million in EBITDA for FY25.
- Both acquisitions are immediately earnings accretive.
- SSKB Strata adds over 44,000 lots to JLG's portfolio.
- Chill-Rite HVAC expands JLG's reach in regional New South Wales.
Acquisition Details
Johns Lyng Group Limited (ASX: JLG) has taken a significant step in its growth strategy by acquiring 100% of SSKB Strata and 84% of Chill-Rite HVAC. The total upfront aggregate consideration for these acquisitions is $57.6 million. Johns Lyng will pay $28.8 million in cash, funded from its existing revolving credit facility, with the balance payable in JLG Ltd shares to be issued upon completion, expected in the first quarter of FY25 (effective 1 July).
Additionally, there is an aggregate earn-out of up to $15.4 million, contingent on FY25 and FY26 EBITDA. The acquisitions are anticipated to generate FY25(F) revenue of more than $45 million and EBITDA of approximately $9 million. Both acquisitions are expected to be immediately earnings accretive.
SSKB Strata
SSKB Strata is a leading provider of strata and strata-related services focused on the east coast of Australia. It manages a portfolio of over 44,000 lots across 790 schemes. JLG's subsidiary, Bright & Duggan, will acquire SSKB, increasing its total portfolio to over 140,000 lots. This acquisition strengthens Bright & Duggan's position as a leader in the strata sector and marks a significant step in its strategic growth trajectory.
Consistent with JLG's equity partnership model, SSKB's experienced senior management team will remain with the business, with the potential to become equity partners in the future. This alignment with JLG's Business Partner model is expected to drive continued growth.
Chill-Rite HVAC
Chill-Rite HVAC is a leading provider of heating, ventilation, and air-conditioning services in regional New South Wales. JLG's subsidiary, Air Control, will acquire an 84% controlling equity interest in Chill-Rite. This acquisition creates a strong foundation for further organic expansion into regional Queensland and Victoria and enhances Air Control's capacity to service larger national contracts with blue-chip clients.
The founder and majority owner of Chill-Rite will reinvest a portion of the proceeds from the acquisition into a 10% equity interest in the combined Air Control/Chill-Rite business, ensuring comprehensive alignment.
The acquisitions of SSKB Strata and Chill-Rite HVAC are expected to have a positive impact on Johns Lyng Group's stock. The immediate earnings accretion and the potential for significant revenue and EBITDA generation in FY25 are likely to boost investor confidence. The strategic fit of these acquisitions with JLG's existing operations and the potential for synergies further enhance the positive outlook.
Investor Reaction:
Analysts are likely to view these acquisitions favorably, given the immediate earnings accretion and the strategic fit with JLG's existing operations. The potential for significant revenue and EBITDA generation in FY25, along with the alignment of experienced management teams, is expected to be well-received by investors.
Conclusion:
Investors should keep a close eye on the completion of these acquisitions and the subsequent integration of SSKB Strata and Chill-Rite HVAC into Johns Lyng Group's operations. The strategic fit and potential for revenue growth make these acquisitions a positive development for JLG. Stay informed on further updates and assess the potential long-term impacts on your portfolio.