Arlington Capital Sells J&J Worldwide Services to CBRE

Arlington Capital Sells J&J Worldwide Services to CBRE

Excluding the earnout provision, the sale to CBRE values J&J Worldwide at 12.3 times the company's 2024 EBITDA

J&J Worldwide is an outsourced provider of facility maintenance services including environmental, housekeeping, janitorial, and custodial services at military bases, military hospitals and laboratories.

SOURCE: J&J Worldwide Services

Arlington Capital Partners has closed its sale of J&J Worldwide Services to publicly traded CBRE Group for $800 million in cash, plus a potential earn-out of up to $250 million.

J&J Worldwide Services, acquired by Arlington Capital through its fifth fund in July 2020, is an outsourced provider of facility maintenance services including operations support at military bases, and engineering services – environmental, housekeeping, janitorial, and custodial – at military hospitals and laboratories.

Source: J&J Worldwide Services

J&J primarily serves the U.S. Department of Defense through long-term, fixed-price contracts. The company employs more than 3,300 people worldwide, serving more than 250 hospitals, clinics and military installations primarily in the United States as well as in Europe, Asia, the Caribbean, and the Middle East. It serves such facilities as Brooke Army Medical Center, Walter Reed National Military Medical Center and the United States Naval Academy.

In 2024, J&J is estimated to have $525 million of revenue and $65 million of EBITDA. Based on the $800 million cash portion of the consideration, J&J is valued at 12.3x 2024 EBITDA, and on the combined cash and earn-out consideration of $1.05 billion, valued at 16.1x 2024 EBITDA.

J&J, led by CEO Steven Kelley and headquartered near Nashville in Franklin, Tennessee, was founded in 1970 (then J&J Maintenance) by Johnny Voudouris and James Lee (the two ‘J’s in J&J).

“Becoming part of CBRE provides J&J a great opportunity to continue building upon and expanding the solutions we provide our military customers at mission-critical facilities around the world,” said Mr. Kelley. “Arlington Capital Partners provided the industry expertise and guidance needed to scale our solutions at an unrivaled pace and prepare us for continued growth. We are excited about combining our capabilities and track record with CBRE’s to enhance our commitment to serving those that serve our nation.”

Dallas-headquartered CBRE Group (NYSE:CBRE) is one of the largest commercial real estate services and investment firms. The company has more than 105,000 employees and approximately 450 offices worldwide. CBRE’s services include facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; consulting; property sales; mortgage services and development services.

Source: J&J Worldwide Services

“The acquisition is consistent with key elements of our M&A strategy that focus on enhancing our technical services capabilities, increasing revenue resilience and secular growth, and expanding our government client base within our Global Workplace Solutions segment,” said Bob Sulentic, chairman and chief executive officer of CBRE. “We are adding a company with deep government contracting experience, long-term customer relationships and a 50-year record of outstanding technical service delivery.”

More than  a year ago in November 2022, CBRE acquired private equity-backed Full Spectrum Group (FSG), a California-based provider of repair, maintenance, and validation services for laboratory instrumentation. Validation ensures that a product, service, or system meets requirements and specifications and is a required component of ISO 9000 certification. FSG offers service contracts, preventative maintenance programs, instrument qualification and repair services, replacement parts, and reconditioned instruments. CBRE acquired FSG from Chicago-based Pfingsten Partners for $110 million.

Bethesda, Maryland-based Arlington Capital invests in government-regulated industries and adjacent markets including aerospace and defense; government services; and technology, healthcare, and business services. Arlington is led by its managing partners, Matt Altman, Michael Lustbader, Peter Manos, and David Wodlinger. In February 2021, Goldman Sachs Asset Management made a non-voting minority equity investment in the firm.

Just last month, Arlington Capital held a hard cap close of its latest fund, Arlington Capital Partners VI LP, with $3.8 billion of capital. The new fund beat its $3.25 billion target, was significantly oversubscribed, and is the largest fund the firm has ever raised.

Citi was the financial advisor to CBRE, and J.P. Morgan Securities was the advisor to J&J on this transaction.

© 2024 Private Equity Professional | March 1, 2024

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