Private equity firm Pacific Equity Partners seals $1bn deal for Johns Lyng Group

Building services giant Johns Lyng Group has agreed to a $1bn takeover from Pacific Equity Partners, providing a potential $200m windfall for veteran chief executive Scott Didier.

Johns Lyng Group chief executive Scott Didier. Picture: Stuart McEvoy

Building services giant Johns Lyng Group has agreed to a $1bn takeover from Pacific Equity Partners, providing a potential $200m windfall for veteran chief executive Scott Didier.

Shares in the target climbed 22.6 per cent to close at $3.90 on Friday after Johns Lyng accepted a PEP offer of $4 a share for the 72-year-old firm.

That is a 77 per cent increase on its May 15 price, the day before the offer was lobbed by the private equity manager. The price values Johns Lyng’s equity at about $1.1bn, or $1.3bn including debt.

The deal underscores PEP’s ambition to identify turnarounds in Australia and New Zealand, where private equity is increasingly picking off listed ASX companies and taking them private.

Private equity accounted for about 31 per cent of mergers-and-acquisitions activity in the US, whereas it was just 14 per cent in Australia, PEP founder Tim Sims said.

PEP used funds from a $3.2bn raising earlier this year to help pay for the deal. That drew commitments from asset managers in North America and Asia, as well as private wealth groups.

Management and employee shareholders will be able to elect to receive some or all of their proceeds in the form of scrip.

Mr Didier, who is Johns Lyng’s largest shareholder with a 17.64 per stake, has backed the deal, lining up a potential windfall of $199.7m.

Johns Lyng provides strata management, fire and flood restoration and airconditioning maintenance across Australia, New Zealand and the US.

It was founded as Johns & Lyng Builders by the Lyng family in Melbourne in 1953, and then acquired in 2003 by Mr Didier, who floated it on the ASX in 2017.

Johns Lyng Group chairman Peter Nash. Picture: LinkedIn

The company, which receives about two-thirds of its revenue from insurance repairs, has struggled in the past year amid fewer big natural disasters. Despite Friday’s gains, the stock is still down more than 34 per cent for the ­period.

About a third of its income ­relies on catastrophe damage as opposed to “business as usual” insurance jobs, meaning it is heavily exposed to climate events.

Johns Lyng’s first-half revenue fell to $573.1m, compared to $610m in the previous corresponding period. Interim profit fell to $54.2m, from $63.9m in the same period last year.

Chair Peter Nash said the company was pleased that PEP had recognised the value of its ­integrated building services ­operations.

“This is an attractive transaction that provides shareholders with the opportunity to receive cash at a material premium,” Mr Nash said.

PEP managing director Matthew Robinson said Mr Didier and his management team had built “a strong business with a distinctive culture”.

Mr Didier said in February the company’s involvement in flood and storm recovery efforts in northern Queensland and NSW highlighted the recurring but unpredictable nature of weather events. That said, the company entered the second half of the year with a strong foundation.

The company’s disaster management business continued to expand and secure new contracts. Last year, the company announced the acquisition of Queensland-based Keystone Group, which provides insurance repairs, restoration and hazardous material removal services to a blue-chip roster of customers.

In recent years, the company also has moved into providing compliance, testing and maintenance services for fire, electrical, and gas systems across both residential and strata-titled building with the acquisition of Smoke Alarms Australia, adding more than 250,000 active customers, and Linkfire, which services more than 8600 buildings.

Johns Lyng’s independent board committee, consisting of Mr Nash and non-executive directors Peter Dixon, Alison Terry and Alexander Silver, are unanimously recommending the deal to shareholders who will get to vote on it in October, in the absence of a superior proposal and subject to an independent expert’s assessment.

The deal will need regulatory approvals.