Arlington Capital Partners to Sell J&J Worldwide Services to CBRE

Rhea-AI Summary

Arlington Capital Partners has agreed to sell J&J Worldwide Services to CBRE Group Inc. for up to $1.05 billion. J&J is a leading provider of essential, preventative maintenance activities to the U.S. Federal Government with over 250 hospitals, clinics, and military installations and 3,300 employees globally. The purchase price includes $800 million of upfront cash and up to $250 million of contingent consideration. The acquisition is expected to close in the coming months.

Insights

Financial Analyst

The acquisition of J&J Worldwide Services by CBRE Group Inc. represents a strategic move that could potentially enhance CBRE's service offerings and expand its market share in the facilities management sector, specifically within government contracts. The purchase price of up to $1.05 billion, with a significant portion contingent on performance, suggests a deal structure that aligns the interests of both parties and mitigates financial risk for CBRE. This acquisition could lead to earnings accretion and diversification of revenue streams for CBRE, given J&J's strong presence in the government sector and its portfolio of contracts with critical infrastructure such as military hospitals and bases.

Investors should consider the implications of the deal on CBRE's financial leverage and its ability to integrate J&J successfully. The upfront cash component will impact CBRE's cash reserves and possibly its debt levels, depending on the financing structure. The long-term benefits, however, could include increased stability in cash flows due to the nature of government contracts, which often provide predictable revenue. The market will likely monitor CBRE's post-acquisition performance closely, especially regarding how well it manages J&J's existing contracts and whether it can leverage its global footprint to expand J&J's services internationally.

Market Research Analyst

The facility management industry, particularly in the context of government contracts, is characterized by high barriers to entry due to stringent regulatory requirements and the need for specialized expertise. CBRE's acquisition of J&J not only consolidates its position in this niche but also signals potential growth in the government-regulated segment of the market. The move aligns with broader industry trends where companies seek to become more comprehensive service providers, thus increasing their competitive moat.

For stakeholders, this acquisition could represent an opportunity to capitalize on synergies between CBRE's real estate services and J&J's facility support offerings. By integrating J&J's expertise in aseptic cleaning and maintenance with CBRE's real estate infrastructure, CBRE could offer a more robust suite of services to government clients. This could lead to an enhanced competitive edge and possibly the capture of additional market share from competitors who lack such integrated capabilities.

Legal Expert

The acquisition's successful closure is contingent upon obtaining regulatory clearances, which is a critical step given the nature of J&J's business in government-regulated industries. The regulatory environment for such acquisitions is stringent and CBRE must navigate this process carefully to avoid delays or impediments. The involvement of high-profile legal advisors suggests a complex legal landscape that requires specialized knowledge to ensure compliance with all applicable laws and regulations.

Moreover, the structure of the deal, with a contingent consideration of up to $250 million, will likely involve specific legal stipulations that outline the performance thresholds J&J must meet. This introduces an element of performance-based risk that could affect the final valuation of the deal. Legal diligence is paramount in ensuring that these clauses are fair and that they accurately reflect the potential of J&J's business to deliver on its promises under new ownership.

Achieving significant organic growth during its four-year partnership with Arlington, J&J is well-positioned under CBRE’s stewardship to continue its growth trajectory

WASHINGTON--(BUSINESS WIRE)-- Arlington Capital Partners (“Arlington”), a Washington, D.C.-area private investment firm specializing in government regulated industries, today announced it has agreed to sell J&J Worldwide Services (“J&J” or the “Company”) to CBRE Group Inc. (NYSE: CBRE). J&J is a leading provider of essential, preventative maintenance activities to the U.S. Federal Government with over 250 hospitals, clinics and military installations and 3,300 employees globally. The purchase price will be up to $1.05 billion, including $800 million of upfront cash and up to $250 million of contingent consideration subject to meeting certain performance thresholds.

Founded in 1970 and headquartered in Franklin, Tennessee, J&J has a comprehensive portfolio of facility support offerings for federal government and healthcare facilities, including aseptic cleaning, maintenance and engineering services, as well as a diverse range of facility management, operational support and integrated asset management services for US Department of Defense military hospitals and bases.

Michael Lustbader, a Managing Partner at Arlington, said, “During our partnership, J&J has achieved significant organic growth by winning large, transformational and critical contracts at facilities where failure is simply not an option for the United States. We are proud to have extended J&J’s 50-year history of continuous organic growth under our ownership. CBRE’s leadership in real estate services and global footprint position them to be an excellent home for J&J to build upon its achievements. J&J represents a prime example of Arlington’s ability to invest in founder-owned businesses and accelerate their growth through our industry expertise and network of world-class executives.”

“It was vital for us to continue the legacy and culture that the Voudouris family worked tirelessly to build. Our partnership with Arlington allowed us to stay true to these core values while accelerating organic growth in all parts of our business,” commented Steve Kelley, CEO of J&J. “Over the last four years and with excellent guidance from Arlington, we have been able to make great strides in further realizing our full potential through increasing our global reach and footprint as well as bringing our unique capabilities to a broader set of customers. The management team and I are excited for our future with CBRE and the opportunities ahead for our combined organizations.”

Gordon Auduong, a Principal at Arlington Capital Partners, added: “J&J continues to prove itself as a highly durable industry leader, and its unparalleled commitment to its customers’ success has led to superior performance in support of U.S. Federal Government infrastructure. We are excited to see how J&J and CBRE will continue to benefit from the secular tailwinds we identified during our initial investment and believe under CBRE’s stewardship that J&J is well-positioned to continue building on its success.”

Closing of the acquisition is subject to obtaining applicable regulatory clearances and other customary closing conditions. Closing is expected in the coming months.

J.P. Morgan Securities LLC is serving as financial advisor to J&J and Sheppard Mullin Richter & Hampton LLP is serving as legal advisor to J&J and Arlington Capital Partners. Citi is serving as financial advisor to CBRE and Simpson Thacher & Bartlett LLP and ArentFox Schiff LLP are serving as legal advisors.

About J&J Worldwide Services

J&J Worldwide Services (J&J) provides World–Class facility services to the United States Federal Government and civilian customers through its Healthcare & Medical Solutions, Mission Support Solutions, and Engineering Solutions business segments. Since 1970, J&J has developed a comprehensive portfolio of aseptic cleaning and maintenance services for military hospitals and clinics as well as a wide array of facility management, operational support, and integrated asset management services for Department of Defense (DoD) military bases. J&J has built a 50–year legacy supported by a more than 3,300–employee global workforce in locations throughout the Contiguous United States (CONUS), Alaska, Hawaii, U.S. Territories and Outside of the Contiguous United States (OCONUS) (Diego Garcia, Thailand, Germany, Italy, Belgium, Spain, Philippines, United Kingdom, Guam, and South Korea). To learn more about J&J Worldwide Services, visit: https://www.jjwws.com/

About Arlington Capital Partners

Arlington Capital Partners is a Washington, D.C.-area private investment firm specializing in government regulated industries. The firm partners with founders and management teams to build strategically important businesses in the aerospace and defense, government services and technology, and healthcare sectors. Since its inception in 1999, Arlington has invested in over 150 companies and is currently investing out of its $3.8 billion Fund VI. For more information, visit Arlington’s website at www.arlingtoncap.com and follow Arlington on LinkedIn.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has approximately 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com. We routinely post important information on our website, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of our website at https://ir.cbre.com. Accordingly, investors should monitor such portion of our website, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240205258952/en/

Kelsey Clute

Arlington Capital Partners

7272 Wisconsin Avenue, 15^th Floor

Bethesda, MD 20814

(202) 337-7500

Ryan Fitzgibbon

Prosek Partners

Pro-arlington@prosek.com

Source: Arlington Capital Partners

FAQ

Who is acquiring J&J Worldwide Services?

J&J Worldwide Services is being acquired by CBRE Group Inc. (NYSE: CBRE).

What is the purchase price for J&J Worldwide Services?

The purchase price for J&J Worldwide Services is up to $1.05 billion, including $800 million of upfront cash and up to $250 million of contingent consideration.

How many employees does J&J Worldwide Services have?

J&J Worldwide Services has 3,300 employees globally.

Where is J&J Worldwide Services headquartered?

J&J Worldwide Services is headquartered in Franklin, Tennessee.

When is the expected closing date for the acquisition of J&J Worldwide Services by CBRE?

The closing of the acquisition is expected in the coming months.