ABM Buys TEGG Franchise Operations

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ABM Industries Inc. (ABM) announced that its subsidiary Linc Network, LLC has acquired the franchise operations of TEGG Corporation, an expansive network delivering comprehensive electrical service and preventive and predictive maintenance solutions to commercial and industrial facilities.

TEGG’s franchise network though mainly concentrated in North America, encompasses 19 countries. This will expand ABM’s international footprint, increasing its service network and in line with the company’s vision of becoming the global leader in integrated facility solutions.

TEGG’s franchisees offer guaranteed services with an extensive list of features that include infrared thermograpy and ultrasonic inspections, de-energized services and electrical systems analysis and reporting. Over the past two decades, TEGG’s franchisees have ensured the protection of commercial and industrial facilities from electrical system failures, electrical fires and resultant business interruptions and property damage. Through the acquisition, ABM will expand its electrical services to include electrical preventive and predictive maintenance solutions.

The inclusion of TEGG’s franchise network will also strengthen ABM’s new division, ABM Franchising Group. ABM Franchising group includes Linc Network, one of the world’s largest commercial HVAC contractor networks, and GreenHomes America (:GHA), a national provider of home performance contracting.

The acquisition also includes the franchise operations of TEGG’s subsidiary CurrentSAFE. CurrentSAFE is a national, residential, electrical, safety franchisor that will highly complement GHA’s operations.

ABM Industries’ strategy entails growth through acquisitions. The acquisition of Linc Group in December 2010 has benefited ABM and given it a better growth profile. However, a significant portion of Linc’s revenues is generated by government contracts and could be negatively impacted by reduced government spending on outsourced services as well as payment delays.

We retain our Neutral recommendation on ABM Industries.  The quantitative Zacks #3 Rank (short-term Hold” rating) for the company indicates no directional pressure on the stock over the near term.

Headquartered in San Francisco, California, ABM Industries provides engineering, janitorial, parking, and security services to thousands of commercial, industrial, institutional, and retail facilities across the U.S. as well as Puerto Rico, British Columbia, and Canada. ABM Industries competes with privately held ARAMARK Corporation, Central Parking Corporation and UGL Services UNICCO Operations Co.

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