With over 30 years of operating history, J&S has grown into a leading integrated single-source audio visual service provider with a well-diversified geographical presence and customer base.
DALLAS – Ashford Inc. announced that it has agreed to acquire a controlling interest in a privately held company that conducts the business of J&S Audio Visual in the United States, Mexico, and the Dominican Republic for approximately $17.1 million in cash and $4.3 million of Ashford common stock consideration (excluding transaction costs and working capital adjustments), subject to certain closing conditions. The transaction is expected to close in the third quarter. J&S provides an integrated suite of audio visual services, including show & event services, hospitality services, creative services, and design & integration, making J&S a leading single-source solution for their clients' meeting and event needs. J&S currently has multi-year contracts in place with approximately 55 hotels and convention centers in addition to regular business representing over 2,500 annual events and productions, 500 venue locations, and 650 clients.
With over 30 years of operating history, J&S has grown into a leading integrated single-source audio visual service provider with a well-diversified geographical presence and customer base. J&S estimates its customer retention rate to be approximately 90% which highlights the high level of quality customer service, professional production quality, and unique, tailored solutions J&S provides. Ashford expects significant revenue and operational cost synergies with the addition of contracts between J&S and Ashford asset-managed hotels. Currently, J&S has two contracts in place with Ashford asset-managed hotels and further roll-out of J&S services into Ashford asset-managed hotels should create significant upside potential.
After giving effect to the transaction, Ashford will own approximately an 85% interest in the common equity of J&S. The Company expects to finance the investment with a term loan of approximately $12 million. In addition, J&S will retain or payoff approximately $777,000 of pre-existing debt, as well as any debt related to new contracts signed before the transaction is closed. During the twelve months ended April 30, 2017, J&S had Net Income of approximately $1.2 million and Adjusted EBITDA of approximately $5.4 million. The implied total purchase price represents, as of April 30, 2017, a trailing 12-month Adjusted EBITDA multiple of 5.7x, according to the Company's preliminary estimates based on unaudited operating financial data provided by J&S. Ashford believes that the implied total valuation of 5.7x Adjusted EBITDA represents an attractive potential return on investment relative to prior comparable transactions with publicly disclosed information.
After J&S becomes the preferred audio visual service provider at most of the planned Ashford Hospitality Trust, Inc. and Ashford Hospitality Prime, Inc. hotels over the next 2-3 years along with conservative growth assumptions on the legacy business, Net Income and Adjusted EBITDA are expected to increase by approximately $2.5 million and $5.2 million, respectively. Ashford expects J&S to initially contribute approximately $1.77 to its Adjusted Net Income per diluted share. J&S should add approximately $2.83 to the Company's Adjusted Net Income per diluted share after J&S becomes the preferred audio visual service provider at most of the planned Ashford Trust and Ashford Prime hotels by December 31, 2020. Existing management for J&S will remain in place and will be heavily incentivized to serve existing business and grow the Company. Monroe Jost will retain the title of Chief Executive Officer.
"This transaction represents the next phase of growth for J&S becoming a leading provider of integrated audio visual services in the hospitality industry," commented Monroe Jost, Chief Executive Officer of J&S. "We look forward to leveraging Ashford's hotel and operating experience and track record of success to further solidify our market position and support the tremendous potential for growth in our business."
"We continue to use our hospitality and management experience to identify and invest in unique business opportunities in the industry and are excited to integrate our deep operating experience with the customer service and professional quality of J&S," said Monty J. Bennett, Ashford's Chairman and Chief Executive Officer. "J&S provides best-in-class solutions for the increasing demand for high-end audio visual needs for meetings and events, and we are excited about the future of this partnership."
Ashford provides global asset management, investment management and related services to the real estate and hospitality sectors.
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