Dealmaker Franklin Agrees to Buy APi Group for $2.9 Billion

(Bloomberg) -- J2 Acquisition Ltd., the investment vehicle backed by serial dealmaker Martin E. Franklin, made its debut acquisition after an almost two-year search with a deal to acquire U.S. engineer and oil pipeline contractor APi Group Inc. for about $2.9 billion.

London-based J2, which is run by Franklin and long-time partners James Lillie and Ian Ashken, is looking to build on their track record of creating outsized shareholder returns, most notably with Jarden Corp. Through a string of acquisitions, they grew the small canning business into a diversified consumer-products giant that was sold for about $15 billion to the company then known as Newell Rubbermaid Inc. in 2016.

"We have the same ambitions here," Franklin said in an interview Tuesday on Bloomberg Television. "This has the potential to be a far larger group than it is today."

His team aims to help APi grow by making larger acquisitions than it has done previously, he said.

It’s a diverse company with a leading position in the so-called life safety market, or fire-protection and security services, he said. It’s also positioned to benefit from a potential pickup in infrastructure investing in the U.S., he said.

APi expects to have $4 billion in revenue in 2019, according to a statement Tuesday, confirming a report in Bloomberg News.

J2 raised more than $1.2 billion in its 2017 initial public offering in London with a broad mandate to acquire a company in any industry or geographic region. The listing still ranks as the largest-ever share sale globally by a special-purpose acquisition company or so-called “blank-check company.” Closely held APi owns a sprawling network of building and industrial services businesses, doing everything from fire equipment installation and monitoring to structural steel fabrication. It generates 95% of its revenue from North America.

J2’s plan is to drive growth at the business via acquisitions and a greater focus on services to help widen margins to 12% by 2023 from an expected 10% this year. It also wants to list APi on the New York Stock Exchange.

"It’s a growth business," Franklin said.

The transaction, valuing the company at a multiple of 7.4 times earnings for the last 12 months, is being funded via a mix of cash, new debt, rollover equity and early warrant exchange.

The deal is expected to close by the end of 2019.

Citigroup Inc., Bank of America Corp., Barclays Plc and UBS Group AG have committed to providing financing for the deal. UBS and Citigroup advised J2, while William Blair & Co. worked with APi.

To contact the reporter on this story: Ed Hammond in New York at ehammond12@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Ben Scent, Frank Connelly

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