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Diversified testing service provider ALS (ASX: ALQ) is expanding its environmental services operations through two separate acquisitions in the US and Europe totalling $225 million.
ALS, the Brisbane company formerly known as Campbell Brothers Ltd, says the acquisition of US east coast-based York Analytical Laboratories and Germany’s Wessling Holding GmbH & Co will boost its annual revenue by about $195 million while building on the group’s strategic focus to grow its increasingly profitable Life Sciences portfolio.
“York Analytical will accelerate our expansion into the USA environmental market, particularly in the fast-emerging northeast region where investment in infrastructure and contamination issues, such as PFAS, support the long-term outlook,” says ALS CEO Malcolm Deane.
“Wessling provides an immediate pathway and operational footprint into the large German and French environmental, food and pharmaceutical markets, which will complement our existing reach in Europe.
“These businesses are expected to improve their underlying profitability through operational improvements, sales growth and efficiencies unlocked within the ALS portfolio, with margins trending towards the current Life Sciences portfolio average. Overall, we expect these projects to deliver returns of mid-teens over the medium to longer term.”
The latest deals, to be funded from existing bank debt facilities, build on 13 acquisitions secured by ALS in FY23 which added a combined $115 million in revenue on a full year run-rate basis.
The Life Sciences division delivered revenue of $1.33 billion for ALS in FY23, up 17.1 per cent from a year earlier, with a strong contribution recorded by the group’s Environmental business. The division accounted for more than half of total group revenue of $2.4 billion for the year.
The acquisition of York, which generated revenues of about $35 million in calendar 2023 and employs a team of about 200, is expected to settle on 1 April 2024.
A full-service environmental testing business operating from eight locations, York specialises in the analysis of water, soil, air and drinking water for regulated contaminants, with an orientation towards per- and polyfluoroalkyl substances (PFAS) testing.
ALS says the acquisition supports its “strategic expansion into the largest global environmental market, providing additional scale and leveraging York’s technical leadership capabilities within the PFAS testing market”.
York has delivered strong organic revenue increases in recent years with a compound annual growth rate of more than 20 per cent between 2019 and 2023.
York Analytical Laboratories itself secured the largest acquisition in the company’s history last year after acquiring two sister laboratories in New Jersey, boosting its expertise in ground water and soil analyses with the deal including Precision Analytical Services, the largest New Jersey laboratory specialising exclusively in drinking water analyses and sampling services.
Wessling, a provider of environmental, food and pharmaceutical testing services across 22 locations in Europe, is a family-owned company that generated revenue of about $160 million in calendar 2023 and supports a workforce of about 1,200 employees.
ALS says this acquisition provides an opportunity to “build a sizeable presence in Europe’s largest testing, inspection and certification markets”.
The move also expands the company’s reach into Germany, France and Switzerland for the first time.
With the Wessling deal subject to approval from European authorities, ALS expects settlement to occur in June 2024.
The US and European acquisitions deliver on the ALS strategy to expand its geographic reach and service offerings, particularly in the Life Sciences field which is “underpinned by industry megatrends such as increased regulations and outsourcing trends”.
“The company remains open to opportunities that fit within our strategic growth framework,” says Deane.
“The near-term focus of the management team is on delivering both the successful integration and improvement of key assets.”
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