CBRE Completes Norland Buyout

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CBRE Group Inc. (CBG) announced the completion of the acquisition of UK-based commercial building technical engineering services provider – Norland Managed Services Ltd. The deal was in line with the company’s efforts to enhance it capabilities and expand its corporate outsourcing platform in Europe. Notably, following this announcement, shares of CBRE hit a new 52-week high of $26.03 during the trading session on Dec 23.

To acquire Norland, CBRE paid £265.5 million (around $434.3 million) in cash at closing, which included a payment for excess working capital and related items. In addition, the company issued 362,916 common stock shares at the closure. Also, it may pay up to £50 million in cash ($81.8 million) in deferred contingent consideration.

Notably, CBRE funded the acquisition with cash in hand and borrowings under its existing revolving credit facility. The company had over $500 million of cash on its balance sheet and around $1.1 billion available on its revolving credit facility while exiting third-quarter 2013.

With the acquisition, Norland is now a part of the company’s Global Corporate Services business in EMEA (Europe, the Middle East & Africa). The CBRE/Norland operations will be led by Ian Entwisle as its CEO.

Founded in London in 1984, Norland earned its repute for its capabilities in managing critical environment facilities, such as data centers and trading floors. It offers its building technical engineering services not only to commercial real estate owners and occupiers in the UK and Ireland, but has a growing clientele in the U.S. and Singapore. It has 4,000 employees in 14 offices and offers its services to over 300 clients.

Our Viewpoint

We believe this acquisition is a strategic fit for CBRE as it gives the company the scope to enhance its business in the EMEA region. Particularly, a compound annual growth rate of over 20% in revenue and profit at Norland over the past 10 years boosts our confidence in this strategic buyout. Also, the company expects it to be moderately accretive to its earnings immediately.

CBRE currently has a Zacks Rank #3 (Hold). Investors interested in the real estate operations industry may consider stocks like E-House (China) Holdings Ltd (EJ), FirstService Corp. (FSRV) and Kennedy-Wilson Holdings, Inc. (KW). All these carry a Zacks Rank #1 (Strong Buy).

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