Transformative Acquisition to Deliver
Accretive Gross Margin, EBITDA Margin and Earnings
Announces Commitment for New Term Loan and
Revolving Credit Facilities
Conference Call with Accompanying Slide
Deck: Wednesday, August 14th at 11:00 am ET
Sterling Construction Company, Inc. (NasdaqGS: STRL) (“Sterling”
or “the Company”) today announced that it has signed a definitive
agreement to purchase Austell, GA-based Plateau Excavation, Inc.
and its related entities (collectively “Plateau”), a leading
specialty contractor, for $400 million; $375 million in cash and
$25 million in Sterling Common Stock and seller notes. Sterling
plans to finance the transaction and replace its current borrowing
facility with a new $400 million term loan together with a $75
million revolving credit facility, for which it has received a
financing commitment from BMO Harris Bank N.A., and its available
cash balance. The transaction is expected to close near the end of
the third quarter of 2019, subject to customary closing conditions
and regulatory approvals.
Plateau serves large, blue-chip customers in the e-commerce,
data center, distribution center and warehousing, and energy
sectors. They are a leading provider of large-scale site
infrastructure improvement contracting services and are the largest
excavating contractor in the Southeastern U.S. Plateau has
approximately 800 employees throughout its region of operation.
Acquisition Highlights
- Provides Sterling with diversification of revenue streams, a
broad range of high-quality customers in rapidly growing end
markets, increasing profitability and cash flow, and reduced
execution risk for the Company overall.
- Geographic expansion into growing Southeast U.S. market where
Sterling has no presence, in addition to opportunities created by
Plateau’s newfound exposure to the South and West regions where
Sterling has a strong foothold.
- Highly scalable footprint and infrastructure with a focus on
fast paced, time sensitive projects requiring a variety of
services, capabilities and types of equipment.
- Three-year revenue growth CAGR of 12% with accretive EBITDA
margins and Free Cash Flow Conversion of approximately 80%.
- Plateau’s experienced and highly effective management team will
stay on and continue leading the business.
- Excluding transaction related costs, the acquisition is
expected to be accretive to EPS and generate free cash flow in the
fourth quarter of 2019.
“Sterling’s acquisition of Plateau aligns directly with our
strategic growth plan as it meets our key criteria of expansion
into adjacent markets, diversification of revenue sources and
customer base, and enhancement of our overall margin mix while
reducing our risk,” said Joe Cutillo, Sterling’s Chief Executive
Officer. “Plateau is a transformational acquisition in that it not
only complements our core heavy civil construction and commercial
concrete businesses, but also gives Sterling access to new
geographies and rapidly growing end markets. Given the similarities
in project execution experience and capabilities, and the
opportunity to leverage both our existing fleet of equipment and
current geographic footprint, we are highly enthusiastic about
Plateau’s ability to drive increased value for our
shareholders.”
“The rapid growth in e-commerce, cloud computing, and the
continuing rise of internet activities makes Plateau, a company
that specializes in data center and warehouse construction, a very
attractive addition to Sterling’s portfolio of businesses,”
continued Mr. Cutillo. “This type of construction commands higher
margins than our heavy highway space and enables us to grow
alongside an impressive end-customer base including many of the
largest and respected e-commerce, social media, logistics providers
and big-box enterprises.”
Mr. Cutillo also expressed his eagerness to begin working with
Plateau management, “We are not only acquiring a best in class
construction company, but a best in class management team. Greg
Rogers and Brad Carroll, the top two executive leaders of Plateau,
will remain onboard to continue running the business in order to
maximize profitable growth and we could not be more excited to
begin our working relationship.”
Plateau’s full-year 2018 revenues were approximately $290
million. Excluding transaction related costs, the acquisition is
expected to be accretive to Sterling’s gross and EBITDA margins,
earnings per share and free cash flow beginning in the fourth
quarter of 2019. Pro forma for the transaction as of June 30, 2019,
Sterling’s secured Debt-to-combined EBITDA ratio would be
approximately 3.1X. Sterling expects strong cash flow to support
deleveraging over the course of 2020 and 2021.
Concurrent with the acquisition of Plateau, Sterling will enter
into a new Credit Agreement which provides for a five-year term
loan facility in the principal amount of $400 million along with a
$75 million revolving credit facility. BMO Capital Markets Corp.
will act as lead arranger and BMO Harris Bank N.A. will act as
administrative agent for the new term loan and revolving credit
facilities.
Conference Call
Sterling’s management will hold a conference call to discuss
this transaction on Wednesday, August 14, 2019 at 11:00 a.m.
ET/10:00 a.m. CT Interested parties may participate in the call by
dialing (201) 493-6744 or (877) 445-9755. Please call in ten
minutes before the conference call is scheduled to begin and ask
for the Sterling Construction call. Following management’s opening
remarks, there will be a question and answer session. Additionally,
a slide presentation that will accompany management’s comments has
been posted to the Investor Relations section of the Company’s
website, which can be found at www.strlco.com, where a simultaneous
webcast of the call will be available as well. If you are unable to
listen live, the conference call webcast will be archived on the
Company’s website for thirty days.
Sterling Construction Company, Inc.
Sterling Construction Company, Inc. (“Sterling” or “the
Company”), a Delaware corporation, is a construction company that
specializes in heavy civil infrastructure construction and
infrastructure rehabilitation as well as residential construction
projects, primarily in Arizona, California, Colorado, Hawaii,
Nevada, Texas, Utah and other states in which there are feasible
construction opportunities. Heavy civil construction projects
include highways, roads, bridges, airfields, ports, light rail,
water, wastewater and storm drainage systems, foundations for
multi-family homes, commercial concrete projects and parking
structures. Residential construction projects include concrete
foundations for single-family homes.
This press release includes certain statements that fall within
the definition of “forward-looking statements” under the Private
Securities Litigation Reform Act of 1995. Any such statements are
subject to risks and uncertainties, including overall economic and
market conditions, federal, state and local government funding,
competitors’ and customers’ actions, and weather conditions, which
could cause actual results to differ materially from those
anticipated, including those risks identified in the Company’s
filings with the Securities and Exchange Commission. Accordingly,
such statements should be considered in light of these risks. Any
prediction by the Company is only a statement of management’s
belief at the time the prediction is made. There can be no
assurance that any prediction once made will continue thereafter to
reflect management’s belief, and the Company does not undertake to
update publicly its predictions or to make voluntary additional
disclosures of nonpublic information, whether as a result of new
information, future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190814005148/en/
Sterling Construction Company, Inc. Ron Ballschmiede, Chief
Financial Officer 281-214-0800
Investor Relations Counsel: The Equity Group Inc. Fred
Buonocore, CFA 212-836-9607 Mike Gaudreau 212-836-9620
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