K-Bro acquires North West of England-based laundry business
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.
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.
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.
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
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.
Linda McCurdy, President & Chief Executive Officer; Kristie Plaquin, Chief Financial Officer; K-Bro Linen Inc. (TSX: KBL), Phone: 780.453.5218, Email: [email protected], Web: www.k-brolinen.com
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