Janitorial services provider ABM Industries Inc said it would buy privately held rival GCA Services Group for about $1.25 billion, more than tripling revenue at its high-margin business that provides services to schools and colleges.
Shares of ABM rose as much as 5.4 percent to $42.90, their biggest intraday percentage gain in more than four months.
GCA Services is owned by Goldman Sachs Group Inc and private equity firm Thomas H Lee Partners LP. It provides janitorial and custodial services to more than 3,200 public schools and over 80 colleges and universities across United States.
Cleveland-based GCA Services also serves corporate office buildings, hotels, biopharma and defense companies, and utilities and warehouses. The company gets about 36 percent of its annual revenue from this business.
Thomas H Lee affiliates and the merchant banking division of Goldman Sachs will own about 14 percent of ABM’s outstanding shares, after the deal closes by September, the company said.
This would make them its biggest shareholder, according to Thomson Reuters data.
A year after the deal closes, New York-based ABM’s annual revenue in its education services business is expected to jump to about $850 million from $250 million. Overall, GCA will add about $1.1 billion to ABM’s annual topline, ABM said.
ABM, which expects to incur about $70 million in one-time costs related to the deal, provides cleaning, parking and other general maintenance and repair services to office buildings, data centers and educational institutions among others.
GCA has a “stellar reputation” in the education industry, ABM’s chief executive Scott Salmirs said on a conference call on Wednesday.
ABM’s offer for GCA Services includes $851 million in cash and $399 million in ABM common stock.
ABM said it expected to save $20 million to $30 million annually within two years of the deal closing.
J.P. Morgan Securities LLC advised ABM, while Goldman Sachs was financial adviser to GCA Services.
ABM said it does not expect to do share repurchases in the near future, in light of the pending deal.