ABM Industries Incorporated
) has entered into an agreement to acquire Air Serv Corporation for
approximately $158 million in cash. The transaction is expected to
be slightly accretive to ABM's earnings in fiscal 2013 and to
contribute significantly in the future. The transaction, pursuant
to customary closing conditions, is expected to close next
Air Serv is a leading provider of integrated facility management
services for the world's leading airlines and freight companies at
airports across the United States and United Kingdom. It generates
annual revenues of approximately $300 million and employs around
12,000 employees globally and provides a variety of janitorial,
passenger, security services and transportation services. Air Serv
is the global leader in wheelchair, baggage handling and skycap
The combined entity will significantly expand ABM's capabilities
in meeting the end-to-end needs of the airlines and airport
authorities and is expected to generate over $650 million in annual
revenues. This acquisition will augment ABM's aviation capabilities
and position the company as the industry leader in this
In the recently reported third-quarter fiscal 2012, ABM posted
adjusted earnings of 37 cents per share, falling short of the Zacks
Consensus Estimate of 42 cents as well as the year-ago quarter
earnings of 51 cents per share.
Total revenue remained flat year over year at $1.08 billion,
missing the Zacks Consensus Estimate of $1.09 billion. Contract
cancellations of government-related businesses in the Facility
Solutions segment negatively impacted the results.
The acquisition will enhance ABM's international footprint and
Air Serv's U.K operations will serve as a base for expanding ABM's
in other services as well. However, the dearth of government
contracts as well as weak global economic condition will weigh on
the margins going forward. Moreover, as the company's Facility
Solution segment depends heavily on government contracts, any
further cancellation of these contracts would have a negative
impact on its revenues.
ABM retains a short-term Zacks #3 Rank (Hold). We have a
long-term Neutral recommendation on the stock.
ABM INDUSTRIES (ABM): Free Stock Analysis
To read this article on Zacks.com click here.