Bidvest Group Limited has announced a strategic acquisition. The company will acquire 100% of Citron Hygiene LP. Citron is currently owned by Birch Hill Equity Partners and other investors.
Deal Details
The acquisition requires approval from the UK Competition and Markets Authority (CMA). The CMA’s decision is expected within five months of submission.
Funding the Acquisition
Bidvest will finance the acquisition through its Revolving Credit Facility. Bidvest is moderately geared at 2.0x net debt/EBITDA as of December 31, 2023. The company has significant undrawn and committed borrowing capacity both internationally and in South Africa.
| Funding Source | Debt/EBITDA Ratio | Credit Facility Maturity |
|---|---|---|
| Revolving Credit Facility | 2.0x | June 2027 with a one-year extension |
Effective Date
The effective date of the acquisition is expected towards the end of 2024, pending regulatory approval.
Overview of Citron Hygiene
Citron Hygiene provides washroom hygiene products and services. Their operations span the USA, Canada, and the UK.
Company Background
Citron was founded in 1974 and is headquartered in Toronto, Canada. The company serves approximately 50,000 customer locations.
Branch Network
Citron operates seven branches in Canada, four in the USA, and ten in the UK.
| Country | Number of Branches |
|---|---|
| Canada | 7 |
| USA | 4 |
| UK | 10 |
Revenue and Customer Base
Citron generates 90% of its revenue from recurring sources. The customer base includes sectors such as manufacturing, hospitality, facilities management, education, commercial, and healthcare.
Market Dynamics
The hygiene services market is resilient with compelling unit economics. Key growth drivers include rising hygiene and safety standards, population growth, urbanization, and period dignity awareness. Legislation in North America mandates free menstrual products in washrooms, further driving growth.
Growth Potential
Bidvest believes Citron’s current revenue is just a fraction of its potential in North America. The total addressable market in Citron’s territories is exponentially larger.
Strategic Rationale
The acquisition aligns with Bidvest’s strategy to expand its international presence in hygiene services. Bidvest aims to enhance its facilities management and the distribution of plumbing and related products.
Key Benefits
Citron meets Bidvest’s growth criteria, providing several strategic advantages:
- Market Position: Citron is a leading player in Canada and key states in the USA.
- Management Team: Citron’s senior management has extensive experience in operating service businesses.
- Revenue Visibility: Annuity income is underpinned by essential services and long average client tenure.
- Growth Prospects: Citron has scalable platforms in a structurally growing industry, supported by regulation.
- Returns: Attractive, sustainable returns with strong cash conversion opportunities.
Integration and Synergies
Citron’s service offerings and geographic presence will complement Bidvest’s Services International division. Best practices can be shared, and infrastructure leveraged, enhancing the overall service delivery. Citron’s footprint allows for growth in the USA and optimization in the UK.
Salient Terms of the Acquisition
The acquisition will be made through The Bidvest Group (UK) Plc, a wholly owned subsidiary of Bidvest. Adjustments, if any, will be processed via an adjustment mechanism outlined in the sale-and-purchase agreement.
Conclusion
Bidvest’s acquisition of Citron Hygiene is a strategic move to expand its international presence. The acquisition offers significant growth potential, leveraging Citron’s strong market position and recurring revenue base. The deal is expected to close towards the end of 2024, pending regulatory approval.