Facility management provider ABM Industries (ABM) has signed an agreement to acquire San Francisco-based facilities services firm Able Services for $830 million in cash. Shares of ABM jumped 2.7% in Wednesday’s extended trade to close at $49.99.
The company has 350 offices and more than 130,000 employees across the world. It offers facility services to institutional, industrial and commercial buildings.
The acquisition, which is expected to be completed by the end of September, is likely to be accretive to ABM’s adjusted earnings per share (EPS) immediately. Additionally, the transaction is expected to boost ABM’s technical and engineering services, which are projected to generate combined annualized revenue of around $2 billion.
Able provides engineering, building maintenance and facility operations in the U.S., with adjusted EBITDA of $65 million and revenues of $1.1 billion. (See ABM stock chart on TipRanks)
The President and CEO of ABM, Scott Salmirs, said, “This acquisition is fully aligned with the strategic plan we have developed to accelerate our revenue growth and margin expansion in the coming years. Able represents an excellent strategic and cultural fit for us, adding to our scale in engineering and janitorial services, which represent priority growth areas for ABM over the next five years.”
“Able’s substantial janitorial services business in key geographies and long-standing relationships with large corporate clients are perfectly aligned with our broader portfolio. We will gain over $400 million in janitorial services revenue at a time when safety and health are of primary importance to commercial clients,” Salmirs added.
Following the completion of the acquisition, ABM expects to achieve cost synergies of $30 million to $40 million, most of which are expected to be realized within the first year.
Last month, William Blair analyst Tim Mulrooney reiterated a Buy rating on the stock but did not provide a price target.
The analyst said, “ABM Industries’ $140 million class action settlement and release agreement for a series of lawsuits relating to unpaid overtime compensation removes a key overhang on the shares. ABM continues to surprise to the positive on adjusted EBITDA results and guidance due to strong demand for virus protection and in-depth commercial cleaning services.”
Overall, the stock has a Moderate Buy consensus rating based on 2 Buys and 2 Holds. The average ABM Industries price target of $61.50 implies 26.4% upside potential. The company’s shares have gained 31.8% year-to-date.
According to TipRanks’ Smart Score rating system, ABM scores a 9 out of 10, suggesting that the stock is likely to outperform market averages.
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