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This article was published 29/5/2017 (1208 days ago), so information in it may no longer be current.

In one fell swoop, Boyd Group Income Fund has exceeded its annual growth target with the largest deal in its 14-year history, acquiring Assured Automotive Inc. with its 68 Ontario locations.

The deal more than doubles Boyd’s Canadian footprint to 110 locations. The Winnipeg-based collision repair operator now has 474 locations in five Canadian provinces and 20 U.S. states.

Boyd CEO Brock Bulbuck said the deal not only greatly contributes to the company’s stated goal of doubling in size from 2015 to 2020, it opens up the largest Canadian market for further growth.

Assured Automotive is the largest non-franchised collision repair operator in Canada. (Before this deal, Boyd had 42 locations compared with Assured Automotive’s 68.)

Bulbuck said when the deal closes in the next 30 to 60 days, those locations will continue to operate under the Assured Automotive brand. Boyd operates throughout the U.S. as Gerber Collision & Glass and as Boyd Autobody & Glass in Canada.

"Our management and board are extremely pleased to make this important acquisition," Bulbuck said. "Both because of the strategic value, scale and geographic diversity it provides us. Also because Assured is a very complimentary business with a growth strategy and a culture of operational excellence and high customer service that is very much aligned with Boyd."

Winnipeg-based Boyd Group will pay $193.6 million for Assured including $146 million in cash and the rest in units of the Boyd Group Income Fund. The company still has about $350 million in available financing and its debt leverage remains comfortably low.

In addition to 10 other locations that the company has acquired since the beginning of the year, this deal brings the total to 78 new locations acquired in 2017 making it a record-setting year for Boyd.

The strong growth statement was welcome news to investors who jumped on Boyd units pushing the price up close to 10 per cent with some trades as high as $100 during the course of the day. The units closed at $98.56 on Monday.

Trevor Johnson, an analyst with National Bank Financial, said his math has the deal adding an additional seven to eight per cent in earnings.

"Usually that is the dictator for what the share price does," he said. "The big thing was the market was concerned potentially of the pace of Boyd’s M & A (mergers and acquisitions) slowing down in the last couple of quarters with questions as to whether they would still reach their goal of doubling by 2020. Well, they did more than a year’s worth of acquisitions in this one transaction."

To reach that goal, Boyd needs to grow by 60 to 62 locations per year.

For the 12 months ending Sept. 30, 2016, Assured reported sales of $141 million and net earnings of $9.6 million.

The acquisition will create $25.5 million in future tax benefits, and Boyd officials say there will be $2 million in annual post-acquisition EBITDA synergies. The deal will push Boyd Group’s annual revenues over $1.5 billion.

In addition to the obvious benefits that come along with the increased scale — Boyd has significant volume discount arrangements with suppliers that will be able to be layered onto Assured’s operations — it also give the company a strong foothold into Ontario, the largest market in Canada, where it previously had only one location in the Kitchener-Waterloo region.

Bulbuck said, "This new regional presence establishes a platform for further growth both by increasing concentration in Assured’s current markets and by establishing locations in other parts of the province. With Assured, we are now much better positioned for future growth in other parts of Eastern Canada."

Bulbuck acknowledged that Boyd paid at the high end of its range of accepted purchase prices but the Assured acquisition also gives Boyd an additional look in terms of the service offering.

Of Assured’s 68 locations, 30 of them are customer intake centres co-located at automotive dealerships. Those locations are manned typically by one employee and do not conduct any collision repair and contain no expensive equipment. But the model does make Assured’s production locations busier and more profitable, with profit margins as much as three per cent higher than the average of Boyd locations.

It is a model not deployed by any other collisions repair organizations and one Bulbuck said would be explored with the possibility of rolling it out elsewhere throughout its operations.

"There is a positive read-through on the dealer intake centres, for sure," Johnson said. "The profitability of Assured is better than what Boyd has typically had on average and a big chunk of that is from the captive dealer network. The referrals work and and the insurance companies like it."

martin.cash@freepress.mb.ca