Dec 29 2012
Granite Construction Incorporated announced today that it has signed a definitive agreement to acquire Kenny Construction Company (“Kenny”), a national contractor and construction manager specializing in the power, tunnel, water and civil markets, for $130 million.
Founded in 1927, Kenny is a privately-owned, Northbrook, Illinois-based company with approximately 425 employees. Kenny offers a comprehensive range of services related to power transmission and distribution, construction management, tunnels, trenchless and underground utilities and heavy-civil infrastructure. Kenny’s revenues are projected to be $270 million for 2012 with approximately 50% of revenues associated with the power sector, 20% associated with tunneling-related work and 30% coming from water/underground and other heavy/civil related work. As of December 31, 2012, Kenny’s backlog is projected to be approximately $390 million.
“This acquisition is an important milestone for Granite as we continue to execute on our strategic plan to diversify, strengthen and grow our business,” said James H. Roberts, Granite’s president and chief executive officer. “The addition of Kenny’s expertise in the power, tunnel and underground markets will significantly expand our presence in these key areas as well as enable us to leverage our capabilities and geographic footprint to take advantage of opportunities across the country.”
Transaction
Under the terms of the definitive agreement, Granite will pay the purchase price of $130 million in cash at closing in exchange for 100% of the outstanding shares of Kenny. The purchase price is subject to adjustment for certain items, including any outstanding Kenny indebtedness. Granite will receive a tax “step up” in the assets of Kenny and its subsidiaries that is expected to provide future tax benefits to Granite. These benefits imply an effective purchase price of 5.0x Kenny’s projected 2012 EBITDA.
Granite intends to finance the transaction through a combination of cash and available borrowings under its existing revolving credit facility. The transaction has been closed in escrow and will become effective on December 31, 2012. One-time costs related to the acquisition of Kenny are estimated to be approximately $5 million and will be recorded in the fourth quarter 2012.
Including integration costs and the impact of intangible amortization, the transaction is expected to be break-even to Granite’s 2013 earnings per share. Excluding intangible asset amortization, the transaction would be immediately accretive. These projections are based on preliminary estimates of the allocation of purchase price intangible assets. The final allocation will be determined after closing.
BofA Merrill Lynch is acting as financial advisor to Granite in connection with the transaction. FMI Corporation is acting as financial advisor to Kenny.
Conference Call
Granite will conduct a conference call today, December 28, 2012 at 8 a.m. Pacific time/11 a.m. Eastern time to discuss the transaction. Access to a live audio webcast and slide presentation is available at http://investor.graniteconstruction.com. The live conference call may be accessed by calling (877) 643-7158. The conference ID for the live call is 85325388. The call will be recorded and will be available for replay approximately two hours after the live audio webcast through January 3, 2013 by calling (855) 859-2056. The conference ID for the replay is also 85325388.
Source: http://www.graniteconstruciton.com