CBRE Group Inc. CBG has agreed to buy the Global Workplace Solutions (GWS) business of Johnson Controls, Inc. JCI for $1.475 billion in cash. The deal would help CBRE offer a full range of integrated real estate and facilities solutions worldwide.
GWS offers integrated facilities management solutions for major occupiers of commercial real estate. The company, with employee strength of approximately 16,000, commands significant presence around the world and reaped around $3.4 billion of revenues in 2014.
GWS will be part of CBRE’s Global Corporate Services (“GCS”) business and following the deal closure, CBRE would manage nearly 5 billion square feet of real estate and corporate facilities globally. Notably, with more corporations and other institutions outsourcing their real estate services, for the past decade, CBRE’s GCS business has been able to enhance its revenues at a double-digit compound annual growth rate.
CBRE expects this deal, estimated to close late third-quarter or early fourth-quarter 2015 and subject to customary regulatory nods, to be significantly accretive to its adjusted earnings per share in 2016. CBRE would also gain expertise as after the closing, GWS’s President, John Murphy would come on board as the global chief operating officer of GCS.
CBRE and Johnson Controls also disclosed a 10-year strategic tie-up, as per which, CBRE would receive equipment, building automation systems and related services for its managed properties from Johnson Controls.
On the other hand, CBRE would offer Johnson Controls a vast range of integrated corporate real estate services spread over 50 million square feet. Moreover, the companies plan to jointly finance an “innovation lab” that would develop energy management solutions to reduce costs of buildings of their clients.
Strategic acquisitions have played a vital role in enhancing the company’s geographic coverage as well as broadening and strengthening its service offerings. We expect the above mentioned acquisition to accelerate CBRE’s growth momentum.
CBRE currently carries a Zacks Rank #2 (Buy). Investors interested in the real estate operations industry may also consider stocks like Landmark Infrastructure Partners LP LMRK and Reis, Inc. REIS. Both these stocks carry the same Zacks rank as CBRE.
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