Johns Lyng buys controlling stake in Keystone

Johns Lyng Group (ASX: JLG) is trading down nearly 0.9% on news it’s bought an 87.5% controlling stake in QLD-based insurance repairs company Keystone Group.

Keystone provides insurance repairs, restoration and hazardous material removal through its subsidiaries Rizon, Remeed and Corvex (hazmat remediation).

JLG said Keystone’s commercial insurance arm was highly complementary to Johns Lyng’s offerings.

“The transaction supports JLG’s position as a market leader and increases its scale and capacity to effectively respond to large-scale catastrophic weather events,” JLG reported in its announcement to the market.

Keystone’s management team will retain a 12.5% equity stake in the business and Johns Lyng will sell an additional 7.5% equity interest to management post-completion.

Johns Lyng will pay upfront consideration of $44.1 million in cash plus $3.6m in JLG shares, with the deal due for completion in the first half of this financial year. Additionally, there’ll be an aggregate earn-out of up to $21.4m, based on FY25 and FY26 EBITDA achievements of the Keystone business.

“The acquisition is expected to be immediately earnings accretive, with an expected
contribution to FY25 revenue of more than $100 million and EBITDA of approximately $9 million,” the announcement said.

JLG Australia CEO Nick Carnell said the acquisition of Keystone was a significant milestone for Johns Lyng in solidifying its position as a provider of insurance building and restoration services in Australia and NZ.

“We are excited to welcome Keystone’s experienced team to the JLG family and look forward to the tremendous value this acquisition will bring to our clients and stakeholders,” he said.

Addressing share price falls

Meanwhile, JLG will up the cash component of its recent acquisition of SSKB Strata and Chillrite HVAC this quarter.

The deal was for $28.8 million in cash and $28.8 million in shares, but responding to JLG’s recent share price decline, Johns Lyng will exercise its option to increase the cash component and will now pay $54.9m in cash and $2.7m in shares.

Funding the deals

In order to fund the acquisitions, Johns Lyng has increased its existing revolving credit facility with ANZ.

JLS last traded at $3.42 at 11.23am (AEST).