LSI Industries Inc., a leading U.S.-based manufacturer of commercial lighting and graphics solutions, has announced the acquisition of privately held JSI Store Fixtures (“JSI”) from RFE Investment Partners for a cash purchase price of $90 million.
Maine-based JSI is a market-leading provider of retail commercial display solutions throughout North America. For more than thirty years, JSI has supplied major supermarket, convenience and specialty store chains with branded display solutions focused on enhancing the customer experience and driving store revenue. Multi-year growth in demand for fresh foods, prepared “grab-and-go” meals and evolving consumer purchasing habits have led to increased demand for JSI’s display fixtures across a deep base of established national accounts.
JSI’s solutions are designed, engineered, manufactured and marketed from four facilities located throughout the United States and Canada.
“JSI is an established market leader within the retail display solutions industry, one whose history of growth and innovation, attractive margin profile and loyal customer following within the supermarket, convenience and specialty store verticals are highly complementary to LSI’s existing portfolio of lighting and graphics solutions,” stated James A. Clark, president and Chief Executive Officer of LSI. “This acquisition will significantly increase LSI’s total addressable markets within the grocery and convenience store verticals, while driving meaningful revenue synergies across our combined product portfolio, consistent with our long-term strategic focus.
“At a commercial level, the combination of LSI’s graphics signage and JSI’s display fixtures businesses, together with our deep portfolio of lighting and program management solutions, will provide a compelling, one-stop value proposition for both new and existing customers.”
Clark continued, “Just as the combination of our lighting and graphics businesses led to the creation of a commercially successful, complementary product offering, the addition of JSI follows a similar template, one that positions us to further diversify our revenue and customer mix within higher-margin product markets. Pro-forma for the transaction, we remain on track to achieve $500 million in annual sales and $50 million in annual Adjusted EBITDA by year-end fiscal 2025.”
“We are excited to join the LSI family,” stated Terry Awalt, CEO of JSI. “Our shared commitment to product innovation, customer-centric relationships, performance excellence and profitable growth position LSI as an ideal partner to scale the JSI brand in the years ahead.
“Our established presence within the supermarket vertical, when combined with LSI’s leading position within the c-store vertical, create a compelling opportunity that we believe will result in significant, long-term revenue synergies for the combined businesses.”
Financial and Transaction Overview
JSI has a long-term track record of consistent financial execution, one characterized by sustained growth in revenue, operating income, adjusted EBITDA and free cash flow.
In the full year calendar 2020, JSI reported total revenue and Adjusted EBITDA of approximately $70 million and $10 million, respectively, resulting in an Adjusted EBITDA margin in excess of LSI’s trailing twelve-month corporate average.
Upon closing, the transaction will be immediately accretive to LSI on an adjusted earnings per share basis.
LSI funded the all-cash acquisition of JSI utilizing its existing cash balance and availability under its $100 million credit facility. At closing, LSI anticipates that its pro-forma ratio of net debt outstanding to trailing twelve month adjusted EBITDA will be approximately 2.6x.
LSI intends to significantly reduce net leverage within the business during the first twenty-four months post-close, supported by anticipated growth in pro-forma free cash flow from the combined entities.
As part of the transaction, LSI will welcome JSI’s more than 300 employees to LSI, while retaining JSI’s experienced leadership, including founder and CEO Terry Awalt, together with each of its four facilities. Following the close of the transaction, JSI will remain an independent brand, given its established presence in the market. LSI anticipates JSI will become part of LSI’s graphics segment on a reporting basis, moving forward.
Compelling Transaction Rationale
Creates a diversified business of scale with meaningful cross-selling opportunities in growing vertical markets. The combination of LSI and JSI will create a leading, integrated provider of lighting and display solutions to the North American supermarket, convenience and specialty store channels. JSI’s established presence within the grocery channel, together with LSI’s market leadership position within the petroleum convenience store and QSR channels, are highly complementary, creating the potential for significant, multi-year revenue synergies.
Provides compelling growth platform with established product portfolio and customer base. LSI estimates the North American remote refrigeration and fixtures market to be approximately $1.7 billion annually and growing. JSI is one of the largest food equipment companies in North America, with a diverse base of recurring, long-term customers, including Whole Foods, Kroger, Target, Albertsons, Ahold Delhaize and Sprouts, among others.
Capitalizes on significant, multi-year investment cycle within the grocery vertical. The North American grocery industry is engaged in a multi-year investment cycle intended to drive incremental in-store traffic growth 38,000+ grocery stores in the U.S. representing $700 billion in annual sales. Increased investment in store remodels, evolving formats, cost-efficient energy-saving solutions and fresh grab-and-go options have driven increased customer appetite for aesthetically appealing, compliant refrigeration solutions and fixtures. LSI believes its time-on-site and share-of-wallet for its lighting and graphics solutions in the grocery vertical will be significantly enhanced by the acquisition of JSI.
Transaction is immediately accretive to LSI’s adjusted earnings per share. JSI is expected to deliver meaningful adjusted earnings per share accretion to LSI in the first year after the close of the transaction, excluding acquisition-related revenue synergies. LSI anticipates a combination of continued, above-market revenue growth, together with significant opportunities for additional margin expansion, have the potential to support incremental accretion, over time.