CBRE Group Inc.
) disclosed the penning of a deal to acquire UK-based commercial
building technical engineering services provider -- Norland
Managed Services Ltd. -- in a deal worth up to £300 million
(approximately $480 million). The move comes as part of CBRE's
efforts to enhance it capabilities and expand its corporate
outsourcing platform in Europe.
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Founded in London in 1984, Norland has earned its repute for its
capabilities in managing critical environment facilities, such as
data centers and trading floors. It offers its building technical
engineering services not only to commercial real estate owners
and occupiers in the UK and Ireland, but has a growing clientele
in the U.S. and Singapore. It has 4,000 employees in 14 offices
and offers its services to over 300 clients.
Notably, some of CBRE-managed accounts such as Bank of America
Merrill Lynch of
Bank of America Corporation
State Street Corporation
) receive services from Norland.
To acquire Norland, CBRE will pay £250 million (around $400
million) plus up to £50 million ($80 million) in deferred
contingent consideration and a payment for excess working capital
and related items. The purchase price is mainly to be paid in
cash apart from £5.6 million ($9 million), which needs to be paid
in CBRE common stock to Norland senior management. The deal is
anticipated to close before the end of this year.
Post the buyout, the existing operations of Norland will be
renamed as CBRE/Norland and the current CEO of Norland - Ian
Entwisle - will lead CBRE/Norland operations as its CEO.
CBRE plans to fund the acquisition with cash in hand and
borrowings under its existing revolving credit facility. Notably,
it had over $500 million of cash on its balance sheet and around
$1.1 billion available on its revolving credit facility while
exiting the third quarter 2013.
A Strategic Fit
We believe this acquisition is a strategic fit for CBRE, which
currently has a Zacks Rank #4 (Sell) following
lower-than-expected results in the third quarter. Also, this
gives the company the scope to enhance its business in the EMEA
region. The company also expects it to be moderately accretive to
its earnings immediately.
Revenue growth at Norland at a double-digit rate every year over
the past ten years and over a 20% compound annual growth rate in
revenue and profit over this period boost our confidence in this
Nevertheless, one can also look at another stock in the same
E-House (China) Holdings Ltd
), which is performing well and carries a Zacks Rank #1 (Strong