Acquisition of Shortridge expands K-Bro's
geographic footprint in the UK
EDMONTON,
AB, April 30, 2024 /CNW/ - K-Bro Linen Inc.
("K-Bro" or the "Corporation") (TSX: KBL) announces the acquisition
of Shortridge Ltd. ("Shortridge"), a high-quality hospitality
laundry provider based in the North West of England, expanding K-Bro's geographic
footprint in the £1.4 billion UK commercial laundry and textile
rental market. K-Bro also owns Fishers Laundry Group
("Fishers"), the commercial laundry and textile rental provider
covering Scotland and the North
East of England, which it acquired
in 2017.
Shortridge is being acquired for consideration of
£24.1 million (approximately C$41.2
million), on a cash-free, debt free basis (subject to
customary conditions, including certain escrows) and with a further
potential earn-out of £2.0 million (approximately C$3.4 million) for achieving certain targets for
the 12 months through September 2024. Shortridge's last
twelve months' revenue for the period ended March 31, 2024 was approximately £12.5 million
(approximately C$21.4 million).
The transaction includes the freehold and leasehold real estate for
Shortridge's laundry processing facilities. The
acquisition is being funded entirely from K-Bro's recently
increased syndicated debt facility and is expected to be accretive
to the Corporation.
Shortridge is headquartered in North West England, with laundry processing
sites in Lillyhall and Dumfries
and a distribution centre in Darlington. Shortridge is a long-established
and respected laundry company and K-Bro plans to retain its
branding. Its experienced management team will remain with the
business and K-Bro intends to retain Shortridge's employees across
its three sites.
Linda McCurdy,
President and Chief Executive Officer of K-Bro, said:
"While our original plans to grow our presence in the UK were
interrupted by the Covid pandemic, we have stayed on the alert for
further growth opportunities in the UK, and I am excited by the
potential that this acquisition presents for us and for
Shortridge's customers. We share the same values as Shortridge, so
the cultural fit is strong and the business has found a good home
as part of the K-Bro family.
"This is a great opportunity for us to diversify
our customer base in the UK and to position our combined UK
business for more growth as we look to extend K-Bro's geographic
reach further south into the UK."
Peter Semple,
Shortridge Business Director, said:
"This is a good news story for Shortridge and our customers as we
join the K-Bro family with the resources and the vision to help us
grow the business further while continuing to look after the
interests of our valued customer base. K-Bro's experience, coupled
with Fishers' strong reputation and track record here in the UK,
make for a formidable team and we can look forward to an exciting
future together."
Transaction Highlights
- High-Quality Operator: Shortridge is a prestigious commercial
laundry operator with a reputation for serving the needs of its
customers well and represents the addition of a second, highly
recognizable local brand in the UK for K-Bro.
- Adjacent Geographic Footprint: Two strategically located
processing facilities and one distribution depot expand K-Bro's
geographic footprint into the North West of England.
- Highly Diversified Customer Base: Shortridge services over
1,200 hospitality customers, including many local, independent
businesses, with no customer representing more than 3% of
revenue.
- Experienced Management and Shared Values: The experienced
management team at Shortridge has significant industry experience
and both K-Bro and Shortridge have shared values in 'putting people
first', prioritizing customers, employees and all
stakeholders.
- Well Positioned for Growth: Shortridge has attractive organic
growth opportunities and K-Bro's vision includes supporting both
existing and new customers. The acquisition creates a foundation to
extend both Shortridge's and Fishers' services further south into
the UK while remaining vigilant for further acquisitive growth
opportunities elsewhere in the UK.
Transaction Financing
The acquisition
is being funded entirely from K-Bro's credit facility. K-Bro
is committed to maintaining a flexible capital structure to support
future acquisition and organic growth.
Legal Counsel
Burness Paull LLP and
Stikeman Elliott LLP are acting as legal advisors to K-Bro.
About K-Bro
K-Bro is the largest owner and operator of
laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range
of general linen and operating room linen processing, management
and distribution services to healthcare institutions, hotels and
other commercial accounts.
K-Bro currently operates ten processing
facilities and two distribution centres under two distinctive
brands, including K-Bro Linen Systems Inc. and Buanderie HMR, in
ten Canadian cities: Québec City, Montréal, Toronto, Regina, Saskatoon, Prince
Albert, Edmonton,
Calgary, Vancouver and Victoria.
About Shortridge
Since the early 1990's, Shortridge has operated
as a family run laundry business, based in Cumbria, with plants in Lillyhall,
Dumfries and a distribution depot
in Darlington.
It specialises in providing high quality laundry
services to local independent hospitality businesses, including
hotels, B&Bs, self-catering units and restaurants.
About Fishers
Fishers was established in 1900 and remained
family owned up to 2003. Acquired by K-Bro in 2017 the company has
invested significantly in its large, highly automated, laundries to
become the leading laundry provider to large hotel chains operating
in Scotland and North East of
England.
The company has also pioneered the use of RFID
technology with its own luxury linen brand to create a bespoke
offering to some of Scotland's
most prestigious hotels and venues.
The company operates five sites in Scotland and the North East of England:
- Cupar – Prestonhall
- Perth
- Newcastle upon Tyne
- Livingston
Coatbridge
FORWARD LOOKING
STATEMENTS
This news release contains forward-looking
information that represents internal expectations, estimates or
beliefs concerning, among other things, future activities or future
operating results and various components thereof. The use of any of
the words "anticipate", "continue", "expect", "may", "will",
"project", "should", "believe", and similar expressions suggesting
future outcomes or events are intended to identify forward-looking
information. Statements regarding such forward-looking
information reflect management's current beliefs and are based on
information currently available to management.
These statements are not guarantees of future
performance and are based on management's estimates and assumptions
that are subject to risks and uncertainties, which could cause
K-Bro's actual performance and financial results in future periods
to differ materially from the forward-looking information contained
in this news release. These risks and uncertainties include,
among other things: (i) risks associated with acquisitions,
including (a) the possibility of undisclosed material liabilities,
disputes and contingencies, (b) challenges or delays in
integrating the targets (c) the diversion of management's time and
focus from other business concerns, and (d) the use of resources
that may be needed in other parts of our business; (ii) K-Bro's
competitive environment; (iii) utility costs, minimum wage
legislation and labour costs; (iv) K-Bro's dependence on long-term
contracts with the associated renewal risk and the risks associated
with maintaining short term contracts which are characteristic of
the Shortridge business ; (v) increased capital expenditure
requirements, including any upgrades to the Shortridge facilities
and increased interest expense associated with drawdowns under
K-Bro's credit facility to satisfy the Shortridge purchase price
and anticipated capital expenditures; (vi) reliance on key
personnel; (vii) changing trends in government outsourcing; (viii)
changes or proposed changes to minimum wage laws in Ontario,
British Columbia, Alberta, and the United Kingdom, which could have
an adverse effect on expenses in respect of employees situated in
those jurisdictions. While a portion of such expenses may be passed
on to or be recoverable from customers, there can be no assurances
that that will occur and (viiii) the availability and terms of
future financing. Material factors or assumptions that were applied
in drawing a conclusion or making an estimate set out in the
forward-looking information include: (i) volumes and pricing
assumptions; (ii) expected impact of labour cost initiatives; and
(iii) frequency of one-time costs impacting quarterly and annual
financial results; and (iv) the level of capital expenditures.
Although the forward-looking information contained in this news
release is based upon what management believes are reasonable
assumptions, there can be no assurance that actual results will be
consistent with these forward-looking statements. Certain
statements regarding forward-looking information included in this
news release may be considered "financial outlook" for purposes of
applicable securities laws, and such financial outlook may not be
appropriate for purposes other than this news release. Forward
looking information included in this news release includes, without
limitation, the terms and conditions of the acquisition and the
credit agreement and the expected revenues, earnings, growth
opportunities following the closing of the acquisition and
statements with respect to future expectations on margins and
volume growth.
All forward-looking information in this news
release is qualified by these cautionary statements.
Forward-looking information in this news release is presented only
as of the date made. Except as required by law, the Corporation
disclaims any intention or obligation to update or revise any
forward-looking statements to reflect subsequent events or
circumstances.
SOURCE K-Bro Linen Inc.