Shares of The Blackstone Group L.P. BX closed slightly higher at the end of yesterday’s trading session following the private equity firm’s announcement to divest AlliedBarton Security Services to French investment firm Wendel SE for around $1.67 billion, including debt.
Blackstone has been planning to sell Philadelphia-based AlliedBarton since Mar 2015 and hired investment bank Credit Suisse Group AG CS to run an auction for the same.
AlliedBarton, which caters to the security needs of corporate clients in several industries including health care, government services, commercial real estate and retail among others, was purchased by Blackstone in 2008 from Ronald Perelman’s MacAndrews & Forbes Holdings Inc. for about $750 million.
With over 60,000 employees and 120 regional offices throughout the U.S. serving more than 3,300 clients, AlliedBarton has grown substantially from the seven-year long partnership with Blackstone. As part of AlliedBarton’s ongoing growth strategy, Blackstone deems it the correct time for the security offering business to seek a new private equity sponsor.
Under the transaction, Wendel will make an equity investment of about $670 million for acquiring 96% stake in AlliedBarton with the remaining stake owned by AlliedBarton’s management. The deal, which is anticipated to be closed at year-end, is subject to customary regulatory approvals.
With an adjusted EBITDA of $148 million and a free cash flow conversion rate of greater than 95% along with revenues of about $2.18 billion as of Mar 31, 2015, AlliedBarton presents an attractive opportunity for Wendel to capitalize on the growing market for outsourced security officer services in the U.S.
For AlliedBarton, Wendel’s long-term development strategies, which involve boosting growth and margins of companies so as to enhance their leading market positions, will help it gain more growth, diversification and innovation going forward.
Currently, Blackstone carries a Zacks Rank #3 (Hold). Some better-ranked investment management firms include Legg Mason Inc. LM and Manning & Napier, Inc. MN. Both these stocks hold a Zacks Rank #2 (Buy).
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