J2 Acquisition Limited Announces Definitive Agreement To Acquire APi Group, Inc.

J2 Acquisition Limited has announced that it has entered into a definitive agreement to acquire APi Group, Inc., a globally renowned provider of commercial life safety solutions and industrial specialty services, for approximately US$ 2.9 billion, subject to customary closing conditions (the ‘Transaction’).

J2 expects to list its shares on the New York Stock Exchange (NYSE) under the symbol APG and change its jurisdiction of incorporation to Delaware in connection with the NYSE listing.

Global life safety solutions firm

APi Group, Inc. is a global provider of commercial life safety solutions and industrial specialty services and a top-5 specialty contractor in the U.S. with a diversified, blue chip customer base, robust contracted services offering, and a track record of successful acquisitions.

The company operates more than 40 nationally and regionally significant businesses with market-leading brands in over 200 locations and generates over 95% of its revenue in North America, primarily in the United States.

Prioritizing strategic M&A and organic growth

APi Group has historically delivered consistent and strong financial results

APi Group has historically delivered consistent and strong financial results and expects to deliver approximately US$ 4 billion in revenue and approximately 10% adjusted EBITDA margins for the full year 2019. The company provides J2 an ideal foundation of market leadership upon which to build through a prudent strategy that prioritizes organic growth, combined with strategic and opportunistic M&A.

The J2 founders Martin E. Franklin, James E. Lillie, and Ian G.H. Ashken, have decades of experience operating, growing, and investing in multiple businesses using a similar strategy focused on organic growth and disciplined acquisitions in niche markets and industries, as well as on building winning cultures.

Employee development program

APi Group, with approximately 15,000 employees, has an industry renowned employee development program. Following its investment in APi, J2 Acquisitions Ltd. plans to continue to build on APi's operating strengths with a focus on expanding the service portion of the business across its portfolio.

Sir Martin E. Franklin, co-founder of J2, commented, “We believe APi is an excellent foundation for J2's initial investment and is solidly in line with our disciplined investment criteria. The Company demonstrates similar qualities to Jarden, in that it unlocks uncommon value from niche businesses and delivers a strong track record of consistent organic performance complemented by disciplined M&A.”

Transaction in line with acquisition criteria

Sir Martin adds, “This Transaction meets our long established acquisition criteria with significant potential for short and long term value creation for our shareholders. We look forward to working with Russ Becker, the President and CEO of APi Group, whose leadership has positioned the Company for the strong growth opportunities ahead."

James E. Lillie, Co-founder of J2, said “We were immediately impressed by APi's management team, its strong culture, and its commitment to leadership development, combined with consistent delivery of margins and cash flow at the high end of its peer group over the years. The business operates in resilient and dynamic markets with attractive growth drivers and we believe that, with the current management team, we can drive shareholder value by guiding the business to even better levels of performance and growth.”

Long-term value creation

We expect APi to deliver long-term value creation through above industry average organic sales growth"

James adds, “We expect APi to deliver long-term value creation through above industry average organic sales growth, its ability to leverage SG&A, expansion of Adjusted EBITDA margins to 12%+ by 2023, continued free cash flow conversion of 80%+, high single digit average earnings growth and maintenance of a long term leverage ratio of 2.0x-2.5x."

APi's existing management team will remain in place, including President and Chief Executive Officer Russell A. Becker and Chief Financial Officer (CFO), Thomas Lydon, who upon closing will become the combined company's CEO and CFO respectively.

New branding - APi Group Corporation

Martin E. Franklin and James E. Lillie will become Co-Chairmen of the Company, Ian G.H. Ashken and Russell Becker will join the board along with a number of other board additions to be announced at closing of the Transaction. J2 intends to change its name to APi Group Corporation upon closing.

Russell A. Becker, President and CEO of APi, commented, “The J2 team's decades of leadership experience operating large diverse businesses, broad industrial knowledge, and disciplined acquisition strategy, which they have employed successfully at previous companies and ventures, will be instrumental in further growing APi's inherent value and innovative, customer-centric approach over the long term.”

Strategic take over

Russell adds, “The J2 team's approach has historically produced impressive results and opportunities for shareholders, customers, suppliers, the communities in which they operate, and importantly, for employees, and is highly complementary to APi's existing culture and strategy. We look forward to benefitting from J2's successful operating experience and investment knowledge.”

He further said, “Additionally, I want to thank Lee Anderson for his 55+ years of service at APi. Our tremendous growth and unique culture would not have been possible without his leadership, commitment, sacrifice and complete dedication to APi.”

J2 Board supports the Transaction

We believe APi Group is an excellent fit with J2 and congratulate the founders of J2 and the management team of APi"

The Chairman of the J2 Board of Directors, Lord Myners of Truro CBE stated “The J2 Board unanimously supports this transaction. We believe APi Group is an excellent fit with J2 and congratulate the founders of J2 and the management team of APi.”

The Transaction is expected to be funded through a combination of J2's cash on hand, new debt financing, early warrant exchange and rollover equity from existing shareholders. For Transaction valuation purposes, Russell Becker's investment of 50% of his net sale proceeds and other existing shareholders rollover equity is valued at US$ 10.25 per share, the same price as the Warrant Financing.

The Transaction details

Current APi shareholders will receive approximately US$ 2.05 billion in cash and 28.373 million ordinary shares in J2 Acquisition Ltd. and will own approximately 14.5% of the company at closing, primarily held by the company's existing employee stock ownership plan. The company's net debt leverage ratio at closing is expected to be 2.8x, assuming the full warrant exercise.

The Transaction includes a tax asset with a net present value of approximately US$ 180 million, resulting in a net purchase price multiple of 7.4x last-twelve-months June 30, 2019 Adjusted EBITDA of US$ 371 million. The Transaction is expected to close in the fourth quarter of 2019, subject to customary closing conditions.