Johns Lyng share price rises on acquisition announcement

The Johns Lyng Group Ltd (ASX:JLG) share price has surged 3.5% so far today following the announcement of a new acquisition.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Johns Lyng Group Ltd (ASX: JLG) share price has surged 3.5% so far today following an announcement that it has acquired a 60% interest in Air Control Australia.

What does Johns Lyng do?

Beginning in 1950s, JLG has grown into a national business with over 800 employees servicing a client base comprising major insurance companies, commercial enterprises, local and state governments, body corporates/owners' corporations and retail customers.

Johns Lyng currently has a market capitalisation of $621 million and its share price has increased by more than 120% over the past 12 months. Shares currently trade with a price-to-earnings ratio (P/E) ratio of 46 and offer a fully franked trailing dividend yield of 1.1%.

What did Johns Lyng announce?

This morning, Johns Lyng announced is has signed a binding contract to acquire a 60% controlling equity interest in Melbourne-based Air Control Australia Pty Ltd, a leading heating, ventilation and air conditioning mechanical services business.

Founded in 2004, the business has established a strong track record servicing commercial office buildings, hotels, shopping centres, and large retail chains. Air Control's client base comprises blue-chip brands including Hyatt, Pullman and Miele, among others.

Johns Lyng announced it will pay $1.6 million cash as well as $0.3 million in JLG shares at the completion of the acquisition, plus a potential earn-out over 18 months for its equity interest in the business.

Residual equity will be retained by Air Control's co-founders and joint managing directors Luke Vandersluis and Anthony Zisis.

John Lyng commented that Air Control generates recurring, annuity-style maintenance revenues plus project and emergency work from a diversified client base and maintains a capital-light business model well aligned with Johns Lyng Group.

Significant synergies that can be tapped into

Johns Lyng believes that Air Control's client base and established brand equity, coupled with its maintenance and emergency work, present significant organic growth opportunities for the group. In turn, this offers major cross-sell opportunities for its existing businesses.

Johns Lyng commented that this includes adding capability to its core Insurance Building and Restoration Services segment through addressing the broader maintenance requirements of Air Control's clients.

The company also believes that it can leverage Air Control's offering through its existing client base, including cross-selling into the strata market through its subsidiary Bright & Duggan.

While Air Control has developed a strong brand presence in the Melbourne market, Johns Lyng will look to expand upon that nationally through its existing platform, and also explore further acquisition opportunities.

The deal is expected to complete in mid-March (subject to customary closing conditions) and is expected to be earnings accretive in FY20. The acquisition will be funded through the company's existing debt facilities with Australia and New Zealand Banking Group (ASX: ANZ).

Motley Fool contributor Phil Harpur owns shares of Australia & New Zealand Banking Group Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why EML, GQG Partners, IGO, and Integrated Research shares are sinking today

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a strong gain. At the time of…

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why EOS, News Corp, Polynovo, and Pro Medicus shares are roaring higher today

These shares are starting the week positively. But why?

Read more »

A couple stares at the tv in shock, one holding the remote up ready to press.
Mergers & Acquisitions

Telstra share price climbs amid $3.4b Foxtel sale

Who is buying the Foxtel business? Let's find out.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Share Market News

Brokers say these ASX 200 growth stocks could rise 50% to 70%

Analysts think these shares could be dirt cheap and destined to generate big returns.

Read more »

Two people having a meeting using a laptop and tablet to discuss Seven West Media's balance sheet
Broker Notes

Why these ASX shares could be top SMSF options in 2025

Analysts are bullish on these high-quality shares. Let's find out why.

Read more »

The words short selling in red against a black background
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

Smiling man with phone in wheelchair watching stocks and trends on computer
Share Market News

5 things to watch on the ASX 200 on Monday

A good start to the week is expected for Aussie investors. Here's what to watch.

Read more »

A businessman compares the growth trajectory of property versus shares.
Opinions

What's the outlook for shares vs. property in 2025?

The experts have put out their new year predictions...

Read more »