CBRE Group (NYSE: CBRE) just announced plans of buying Direct Line Global from Guardian Capital Partners.
Its shares have been in a downtrend over the past three months and are down another 1.0% on Wednesday morning.
What we know about CBRE-Direct Line transaction
The commercial real estate services and investment firm did not disclose terms of its agreement with Direct Line Global including what it has agreed to pay for the acquisition.
Direct Line currently employs more than 1,000 technicians for data centre services. Bill Nelligan – its chief executive said in a press release today:
The Company has achieved significant and diversified growth in a demanding data centre market. Guardian’s partnership was instrumental in fostering our evolution of the business and we look forward to continuing this growth under CBRE’s ownership.
CBRE stock is now down more than 10% versus its year-to-date high in late March.
How may Direct Line acquisition help CBRE?
Note that the global data centre support services market is worth about $30 billion and is projected to grow at an annualised rate of 16% through 2028.
CBRE expects the Direct Line Global acquisition to be immediately accretive to its core per-share earnings as it will enable the New York listed firm to offer integrated data centre solutions like none other. According to Vikram Kohli – its chief operating officer:
This acquisition fits squarely with our strategy of enhancing capabilities in asset classes that benefit from secular tailwinds – in this case, the increasing digitisation of the global economy.
CBRE stock does not pay a dividend at writing.
CBRE failed to meet revenue estimates in Q1
Direct Line will now become a part of the Data Centres Solutions unit of CBRE Group.
In May, CBRE reported its core per-share earnings tanked nearly 15% on a year-over-year basis to 78 cents in the first quarter. The metric, nonetheless, topped consensus at 69 cents.
At $7.94 billion, however, a 7.1% annualised growth in quarterly revenue came in shy of Street estimates of $8.1 billion.
Still, $CBRE reiterated its core EPS guidance at $4.25 to $4.65 last month. Bob Sulentic – chief executive of the Texas based company said at the time:
Our confidence in achieving our earnings outlook is underpinned by our Resilient BUsinesses’ continued strong performance, our rapid actions on costs, and the fact that the Advisory Segment remains on track to achieve its growth target for the year, despite a more uncertain economic outlook.
The aforementioned guidance is roughly in line with analysts at $4.45 per share. Wall Street currently has a consensus “overweight” rating on CBRE stock.
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