North American Construction Group Announces Expansion of Heavy Construction Fleet Via an Attractive Acquisition
October 03 2018 - 6:00AM
North American Construction Group Ltd. (“NACG” or “the Company”)
(TSX:NOA.TO/NYSE:NOA) today announced that it has entered into a
definitive purchase and sale agreement to acquire the heavy
construction equipment fleet and related assets of Aecon Group Inc.
for $199.1 million in cash (the “Transaction”), subject to
customary closing adjustments. A $10 million deposit was paid
upon signing the agreement, which will be credited towards the
purchase price on closing. The balance of the price will be paid in
four instalments with the first instalment of $153.6 million due at
closing and the following three instalments of $11.8 million each
being paid six, twelve and eighteen months following closing. In
NACG’s determination, the purchase price is consistent with the
book value of comparable property and equipment already owned by
the Company.
“During the recent severe cyclical downturn in
the oil industry we worked extremely hard to be part of the
solution to help lower the operating costs of our customers on
oil-sands mines,” said Martin Ferron, Chairman and CEO of NACG. “We
achieved this by maximizing the uptime and operability of our
equipment fleet through innovative maintenance practices and work
methodologies. We are therefore now pleased to better serve our
customers by applying the same innovations to an expanded fleet, at
a time when they are striving to maximize production and efficiency
on each mine.”
“The transaction is expected to provide NACG
with over $220 million of additional annual revenue capability
which we anticipate will soon be underpinned by term contracts with
multiple customers,” added Mr. Ferron. “Largely because we already
have much of the indirect cost structure in place to support the
incremental activity, we expect the transaction to be accretive to
EBITDA, free cash flow and earnings. In particular, we anticipate
2019 basic earnings per share could exceed $1.60, subject to the
transaction closing by the end of 2018.”
The Transaction involves the purchase of Aecon’s
fleet of heavy earth-moving assets, together with lighter
construction assets, support equipment and maintenance facilities.
Additionally, existing contractual commitments will be assigned to
NACG, subject to customer and partner consents.
The Transaction will be fully financed at
closing through an upsized and extended credit facility with NACG’s
existing lenders, led by National Bank Financial Inc. Given the
strong addition to free cash flow from this Transaction, as well as
the Company’s previously announced acquisition of an ownership
interest in Nuna Logistics Limited, NACG intends to use operational
cash flow to de-lever its balance sheet by around $150 million over
the next three years, while still having sufficient cash flow to
apply to other growth initiatives.
Forward Looking Information
This release contains forward-looking
information that is based on expectations and estimates as of the
date of this release. Forward-looking information is information
that is subject to known and unknown risks and other factors that
may cause future actions, conditions or events to differ materially
from the anticipated actions, conditions or events expressed or
implied by such forward-looking information. The forward looking
information in this release include statements with respect to the
expected level of additional annual revenue capability provided by
the equipment acquisition; the expected term contracts with
multiple customers that could be entered into based on this
additional equipment capability; the expected accretion to EBITDA,
free cash flow and earnings, and the anticipated 2019 basic
earnings per share possibly exceeding $1.60; the timing of the
closing; and the expected de-levering our balance sheet by
approximately $150 million over the next three years. There can be
no assurance that forward-looking information will prove to be
accurate, as actual results and future events could differ
materially from those expected or estimated in such statements.
Accordingly, readers should not place undue reliance on
forward-looking information. The risks and uncertainties that may
affect forward-looking statements include, among others: impact of
the global economy; project delays due to weather related
conditions; the possibility that equipment is of a quality that we
expect; our inability to close the acquisition, or delays in
closing it, resulting from failure or delays in relation to
satisfying conditions of closing or other unanticipated factors;
and other risks detailed from time to time in NACG’s filings with
securities regulatory authorities. Forward-looking statements are
based on management's current plans, estimates, projections,
beliefs and opinions, and other than as required by applicable
securities laws, NACG does not undertake any obligation to update
forward-looking statements should assumptions related to these
plans, estimates, projections, beliefs and opinions change.
Non-GAAP Financial Measures
A non-GAAP financial measure is generally
defined by the Canadian regulatory authorities as one that purports
to measure historical or future financial performance, financial
position or cash flows, but excludes or includes amounts that would
not be adjusted in the most comparable GAAP measures. EBITDA is a
non-GAAP financial measure. This term does not have any
standardized meanings prescribed within GAAP and therefore may not
be comparable to similar measures presented by other companies.
This measure should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
GAAP. EBITDA is defined as is defined as net income (loss) before
interest expense, income taxes, depreciation and amortization. We
believe that EBITDA is a meaningful measure of business
performance. For a further discussion of EBITDA and a
reconciliation to net income (loss), please refer to our most
recent Management’s Discussion & Analysis filed with securities
regulatory authorities. Free Cash Flow (“FCF”) is defined as cash
from operations less cash used in investing activities (excluding
cash used for growth capital expenditures and cash used
for/provided by acquisitions). FCF is a relevant measure of
cash available to service NACG’s Total Debt repayment commitments,
pay dividends and fund working capital needs and share
purchases. In addition, FCF is available to fund both growth
capital expenditures and potential strategic initiatives.
About the Company
North American Construction Group Ltd.
(www.nacg.ca) is a premier provider of heavy construction and
mining services in Canada. For more than 60 years, NACG has
provided services to large oil, natural gas and resource
companies.
For further information, please
contact:
David Brunetta, CPA, CMA Director, Investor RelationsNorth
American Construction Group Ltd. Phone: (780) 969-5574 Email:
dbrunetta@nacg.ca
PDF
available: http://resource.globenewswire.com/Resource/Download/37d01f1b-028c-4548-be2e-2dbdbf78549e
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