Johns Lyng to Acquire Majority Stake in Keystone Group for $69 Million – Capital Brief

The news: Construction services provider Johns Lyng Group has announced it is acquiring a majority stake in Keystone Group, a Queensland-based construction insurance and renovation services company.

The Book of Numbers: The company will pay an upfront payment of $44.1 million plus 3.6 million fully paid Johns Lyng shares upon completion of the transaction. In addition, it will pay a total consideration of up to $21.4 million contingent upon Keystone achieving FY25 and FY26 profit thresholds.

Johns Lyng said it will initially take an 87.5% stake in Keystone, with the rest retained by management. It will then sell a 7.5% stake to management upon completion of the transaction to ensure continued strategic alignment. The acquisition is expected to be immediately accretive to earnings.

The company’s shares fell 1.2% to $3.41 in early trading on the ASX.

Context: Johns Lyng said Keystone has developed a significant commercial insurance segment that is highly complementary to the company’s offering, and the acquisition will strengthen the company’s strategic growth pillar of insurance construction and renovation services, which delivers predictable and recurring underlying revenue through daily insurance events.

The latest acquisition follows the purchase of property management company SSKB Strata and air conditioning specialists Chill-Rite HVAC for a combined $57.6 million. The company said both deals would close in the first quarter of fiscal 2025. Last month, the company missed its full-year revenue forecast, prompting analysts to lower the stock.