Allegion to Gain From GWA Group’s Business & ISONAS Buyouts

Allegion plc ALLE recently completed two acquisitions through its subsidiaries, including Door and Access Systems business of GWA Group Limited, and ISONAS Security Systems Inc. While the Door and Access Systems buyout is worth AUD 107 million — funded through cash in hands and funds available through revolving credit facility, the financial terms of the ISONAS buyout was not disclosed by the company.

The deal to acquire GWA Group’s Door and Access Systems business was originally announced in May 2018 while that of ISONAS was communicated in June.

Detail of Buyouts

The buyout of the Door and Access Systems business of GWA Group has added two leading Australian brands — API Locksmiths and Gainsborough — to Allegion’s product portfolio. API Locksmiths branded products are used in commercial markets while Gainsborough products are meant for use in the residential market.

This buyout will strengthen Allegion’s foothold in Australia, thereby expanding the company’s presence in the Asia-Pacific region. Also, it will boost the company’s revenue generation capabilities, evident from AUD 95-million sales recorded in 2017.

In 2018, Allegion anticipates slight accretion to adjusted earnings per share from the acquired Door and Access Systems business.

Additionally, Allegion has completed acquiring ISONAS. The edge-computing technology provided by ISONAS serves non-residential end markets by providing access control solutions. The Boulder, CO-based firm has a wide customer base, and a strong network of certified committed distributors and integrators. In 2017, ISONAS generated $6 million revenues.

The ISONAS buyout will reinforce Allegion’s existing technology portfolio and go together with its channel initiatives. The acquired assets will operate as one of Allegion’s Americas businesses.

Snapshot of Allegion’s Inorganic Initiatives

We believe that the above-mentioned transaction is consistent with Allegion’s policy of acquiring businesses to gain access to new customers, regions and product lines.

Prior to the above-mentioned buyouts, in March 2018, Allegion acquired the manufacturer of high-performance interior and healthcare door systems — Aurora Systems, Inc. (AD Systems). In February 2018, the company purchased Qatar Metal Industries — Middle East-based manufacturer of commercial steel, and wooden doors and frames. In January, the company acquired Technical Glass Products or TGP — North America-based manufacturer of the advanced fire-rated entrance and wall systems — as well as added Hammond Enterprises to its portfolio.

It’s worth mentioning here that acquisitions/divestitures had a positive impact of 4.7% on sales growth in first-quarter 2018. On a geographical basis, acquired assets or divestitures lifted sales in the Americas and EMEIA region by 4.7% and 5.6%, respectively.

Zacks Rank & Key Picks

Despite efforts on improving its business portfolio via acquisitions; labor shortage and ongoing constraint across the construction supply chain are adversely influencing Allegion’s results. With a market capitalization of nearly $7.4 billion, the company currently carries a Zacks Rank #4 (Sell).

In the past three months, Allegion’s shares have declined 9.4%, worse than 1.3% fall of the industry.

Also, the company’s Zacks Consensus Estimate remained stable at $4.48 for 2018 while declined 0.2% to $4.95 for 2019 from the 60-day-ago tally.

Allegion PLC Price and Consensus

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