The second infrastructure vehicle of EQT Partners , the Swedish-based buyout firm, has acquired WASH Multifamily Laundry Systems from Chicago-headquartered CHS Capital.
The move closely follows EQT's divestment from Minneapolis, Minnesota-based cooking oil management services company RTI. The transaction value was not disclosed.
“WASH's current management has taken a family-owned company with a strong and long history of providing essential services to its customers, and transformed the business into a technology-driven platform that is a true leader in the industry,” said Stefan Gleven, a partner at EQT and investment advisor to EQT Infrastructure II.
“We have followed the company for some time and have been impressed by WASH's stable earnings base, defensible market position and multiple growth avenues.”
Founded in 1947 and headquartered in El Segundo, California, WASH is the largest provider of route-based laundry services to multifamily apartments and universities in Canada and the second-largest in the US, with operations in all of the Canadian provinces and 16 US states. The company installs, owns and maintains machines in common laundry rooms. It also collects cash from the appliances on behalf of property owners.
The company has approximately 880 employees and an installed base of more than 500,000 machines at over 70,000 locations. It operates from 27 branch offices, using 600 fleet vehicles equipped with advanced routing technology
EQT reports that WASH has an average customer tenure of 20 years with a 98 percent retention rate, making it potentially a valuable addition to their infrastructure services portfolio.
The company's current management team, led by chief executive Adam Coffey, will remain in place, according to a statement. Coffey said his team was “excited about EQT's governance model and differentiated approach to investing”.
The acquisition marks EQT's sixth investment in North America and its second investment into a route-based infrastructure services company. It is expected to reach final close during the second quarter of 2015, following customary antitrust approval. Transaction financing will be provided by Morgan Stanley, Goldman Sachs and Natixis.
Valued at €1.9 billion, the majority of EQT Infrastructure II's commitments come from the Nordic region (40 percent), with North American commitments comprising 21 percent of the total. The rest of Europe and the Asia Pacific region represent 19 and 17 percent of commitments, respectively. Sixty-four percent of investments were committed by pension and sovereign wealth funds, 23 percent came from financial institutions and the remaining 13 percent was committed by a smattering of fund-of-funds, endowments, foundations and family offices.
In an interview with Infrastructure Investor, Gleven described EQT Infrastructure II as an operational-focused fund, and said EQT has been “very much focused on finding companies with good prospects for growth” since it was founded in 1994.
While the fund holds its fair share of more traditional infrastructure assets – such as Spanish telecom infrastructure company Islalink Submarine Cables and rail freight company Hector Rail AB, both acquired in September 2014 – Gleven said that one of the unique qualities of EQT Infrastructure II is that his team also considers infrastructure services companies and other less obvious infrastructure-oriented businesses for acquisition.
He added that while a laundry services company might not fit the traditional infrastructure mould that some investors have cast, his team deems such companies worthy of investment. EQT sees WASH, for instance, as a collection of assets with room for growth through “add-on acquisitions” – a tool in the firm's toolbox used often to beef up businesses in its portfolio by conglomerating similar assets.
“If you look at many of the characteristics of [WASH], they are exactly the same as utilities: You have a large installed base, very long-term contracts, and it is a technology that is extremely difficult to replicate. It might not look as obvious as a toll road, but we see very stable downside protection,” Gleven said.
“We have found, we think, an interesting niche in the infrastructure space.”