Positions Granite as a National Leader Across
Both Transportation and Water Infrastructure Markets
Transaction Equity Value of $376 Million
Expected to Generate Annual Cost Synergies of
Approximately $20 Million
Enterprise Value Multiple of 8.2x 2018 Expected
EBITDA1, Including Full Run-Rate of Cost Synergies
Expected to be Accretive to Granite's Adjusted
EPS and High Single-Digit Accretive to Granite's Adjusted Cash EPS
in First Year After Close2
Granite to Host Conference Call and Webcast at
5:30 a.m. PT / 8:30 a.m. ET Today
Granite Construction Incorporated (NYSE: GVA) and Layne
Christensen Company (NASDAQ: LAYN) announced today that they have
entered into a definitive agreement whereby Granite will acquire
all of the outstanding shares of Layne in a stock-for-stock
transaction valued at $565 million, including the assumption of net
debt. The transaction, which was unanimously approved by the Boards
of Directors of both companies, is expected to close in the second
quarter of 2018.
Under the terms of the agreement, Layne shareholders will
receive a fixed exchange ratio of 0.270 Granite shares for each
share of Layne common stock they own. This represents $17.00 per
Layne share, or a premium of 33%, based on the volume-weighted
average prices for Granite and Layne shares over the past 90
trading days. Following the close of the transaction, Layne
shareholders will own approximately 12% of Granite shares on a
fully diluted basis, and Granite's Board will be expanded to
include one additional director from Layne. The transaction
represents an enterprise value multiple of 8.2x 2018 expected
EBITDA1.
As a leading water management, construction, and drilling
company with the #1 position in well drilling and a #2 position in
cured-in-place pipe (CIPP) rehabilitation, Layne significantly
enhances Granite's presence in the large and growing water
infrastructure market. The combined company, including Granite's
existing water business, will have water-related revenues of
approximately $600 million3, positioning Granite as a national
leader across both the transportation and water infrastructure
markets. Together, Granite and Layne will have nearly 7,000
employees and serve a diverse and growing customer base.
"This strategic transaction brings together two complementary
organizations to create a platform for growth, delivering
significant benefits for shareholders, employees, and customers,"
said James H. Roberts, President and Chief Executive Officer of
Granite. "With Layne's expertise and leading water positions,
Granite will advance its goal of becoming a full suite provider of
construction and rehabilitation services for the water and
wastewater market. With enhanced scale and capabilities, Granite
will be better positioned to address the growing water and
wastewater needs throughout the infrastructure lifecycle. We expect
this transaction will create value for shareholders in both the
near- and long-term, including earnings accretion on an adjusted
basis and synergy realization. As a stronger player in the
attractive water and wastewater sector, we will have significant
opportunities to capture a larger share of the market and
accelerate our growth prospects."
"We are pleased to reach this agreement with Granite, which
creates significant value for all Layne stakeholders," said Michael
J. Caliel, President and Chief Executive Officer of Layne. "Our
organization believes that Granite is the right partner. This is a
terrific opportunity as our shareholders will receive a significant
premium and share in the upside potential in a diversified and
growing company with greater scale and resources. Our customers
will benefit from our shared commitment to operational excellence,
quality, and customer service, and our employees will benefit from
the upside and strong growth prospects of being part of a larger
infrastructure company. Our leadership position in water resources
combined with our increasing presence in the growing water
midstream business should be greatly enhanced by our combination
with Granite. The Layne team looks forward to working together with
Granite to implement a seamless transition."
Mr. Roberts concluded, "Together, Granite and Layne will provide
expanded career opportunities as a larger, stronger, and more
diversified company. Granite will also benefit from gaining the
expertise and specialized skills of Layne employees as we expand
our presence in water infrastructure. Importantly, we believe this
combination unites two similar cultures that emphasize core values
focused on ethics, safety, sustainability, and a commitment to the
communities in which we work and live. We look forward to welcoming
Layne's talented employees to Granite. Together, we can capitalize
on attractive and growing market opportunities, given the expected
increase in demand for large water infrastructure programs."
Creates a Platform for Growth
- Establishes Granite's Leadership
Position in the Water Infrastructure Market. Layne is a leading
water management, infrastructure services, and drilling company
with a broad portfolio and a diverse and growing customer base
across municipal, industrial, agriculture, and energy end markets,
with water-related services accounting for over 80% of revenues4.
Together with Layne, Granite will be a leader in water
infrastructure and wastewater rehabilitation, well positioned to
take advantage of the attractive macro dynamics of the water
services industry. The U.S. municipal utility sector is forecasted
to spend $532 billion in capital expenditures through 2025, with
over 50% of the spending expected to be related to water and
wastewater distribution networks.5A combination with Layne
represents the next logical step in the evolution of Granite's
strategy to diversify its service offerings by expanding in the
water and wastewater market. Since acquiring Kenny Construction
Company in December 2012, which gave Granite an entrance into the
water markets, Granite has made a number of investments in the
water sector to strengthen its capabilities, expand its footprint,
and grow its presence. Now, with the addition of Layne's leading
portfolio of services, Granite will be better positioned in water
infrastructure and wastewater rehabilitation.
- Provides a Broad Portfolio of
Services to the Water Sector. Together with Layne, Granite will
enhance its capabilities and service offerings to provide a full
lifecycle portfolio to better meet the needs of its public and
private water sector customers.
- Creates a National Footprint with
Capabilities Across Water and Transportation Markets. Granite
is a leader in the transportation market with a significant
presence across the U.S. and backlog of over $3.7 billion. Together
with Layne, Granite will offer a broader suite of services in more
markets across the country, with greater reach, particularly in the
Midwest.
- Adds Significant Base of Stable,
Recurring Revenue. With a greater presence in the growing water
and wastewater end markets, Granite will benefit from more stable
and diverse funding sources. Specifically, Granite will benefit
from Layne's consistent, recurring revenue stream in maintenance,
repair, and Inliner product sales. On a pro forma basis, Layne's
revenue would represent 14%6 of the combined company, which is
anticipated to increase as Granite capitalizes on additional
meaningful revenue opportunities.
Delivers Substantial Financial Benefits
- Drives Significant Cost Savings.
Granite expects to achieve approximately $20 million of annual
run-rate cost savings by the third year following the close of the
transaction, with approximately one-third realized in 2018. Granite
expects to incur approximately $11 million in one-time costs to
achieve these savings.
- Accretive to Granite's Earnings.
The transaction is expected to be accretive to Granite's adjusted
earnings per share, and high single-digit accretive to Granite's
adjusted cash earnings per share in the first year after
closing7.
- Maintains Granite's Financial
Strength and Flexibility. The combined company will have a
strong balance sheet and liquidity profile. Following the close of
the transaction, Granite will maintain an investment grade credit
profile with debt-to-EBITDA of less than 1.5x8. The expected strong
cash flow generation of the combined business will enable Granite
to return to current leverage levels by the end of 2018.
Financing, Approvals, and Close
Granite expects to assume outstanding Layne convertible debt
with principal value of $170 million and honor the terms and
existing maturity date provisions of the indentures. The
transaction is not expected to trigger any change of control
provisions under Layne's indentures. Granite also expects to fund
the cash financing requirements of the transaction of approximately
$70 million through a combination of existing cash on hand and
availability under Granite's revolving credit facility. Following
close, Granite will maintain an investment grade credit profile and
significant financial flexibility.
The transaction, which is expected to close in the second
quarter of 2018, is subject to the satisfaction of customary
closing conditions, including applicable regulatory approvals and
the approval of the shareholders of Layne. Wynnefield Capital,
which has an approximate 9% voting interest in Layne, has agreed to
vote in favor of the transaction. In connection with the
transaction, Granite will issue approximately 5.4 million shares9
of Granite common stock to Layne common stockholders.
Advisors
Perella Weinberg Partners LP is serving as financial advisor to
Granite, and Jones Day is serving as legal counsel. Greentech
Capital Advisors, LLC is serving as financial advisor to Layne, and
Latham & Watkins LLP and Stinson Leonard Street LLP are serving
as legal counsel.
Conference Call and Webcast
Granite will conduct a conference call today, Wednesday,
February 14, 2018, at 5:30 a.m. Pacific Time/8:30 a.m. Eastern
Time to discuss this announcement. Access to a live audio webcast
and slide presentation will be available on its Investor Relations
website, investor.graniteconstruction.com. An archive of the
webcast will be available on the website approximately one hour
after the call. The live call also is available by calling
1-877-328-5503; international callers may dial 1-412-317-5472. A
replay will be available after the live call through February 21,
2018, by calling 1-877-344-7529, replay access code 10117211;
international callers may dial 1-412-317-0088.
About Granite
Through its offices and subsidiaries nationwide, Granite
(NYSE:GVA) is one of the nation's largest infrastructure
contractors and construction materials producers. Granite
specializes in complex infrastructure projects, including
transportation, industrial and federal contracting, and is a proven
leader in alternative procurement project delivery. Granite is an
award-winning firm in safety, quality and environmental
stewardship, and has been honored as one of the World's Most
Ethical Companies by Ethisphere Institute for nine consecutive
years. Granite is listed on the New York Stock Exchange and is part
of the S&P MidCap 400 Index, the MSCI KLD 400 Social Index and
the Russell 2000 Index. For more information, visit
graniteconstruction.com.
About Layne
Layne is a global water management, infrastructure services and
drilling company, providing responsible solutions to the world of
essential natural resources — water, minerals and energy. We offer
innovative, sustainable products and services with an enduring
commitment to safety, excellence, and integrity.
Forward Looking Statements
All statements included or incorporated by reference in this
communication, other than statements or characterizations of
historical fact, are forward-looking statements within the meaning
of the federal securities laws, including Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements are based on Granite's current expectations, estimates
and projections about its business and industry, management's
beliefs, and certain assumptions made by Granite and Layne, all of
which are subject to change. Forward-looking statements can often
be identified by words such as "anticipates," "expects," "intends,"
"plans," "predicts," "believes," "seeks," "estimates," "may,"
"will," "should," "would," "could," "potential," "continue,"
"ongoing," similar expressions, and variations or negatives of
these words. Examples of such forward-looking statements include,
but are not limited to: (1) references to the anticipated benefits
of the proposed transaction; (2) the expected future capabilities
and served markets of the individual and/or combined companies; (3)
projections of financial results, whether by specific market
segment, or as a whole, and whether for each individual company or
the combined company; (4) market expansion opportunities and
segments that may benefit from sales growth as a result of changes
in market share or existing markets; (5) the financing components
of the proposed transaction; (6) potential credit scenarios,
together with sources and uses of cash; and (7) the expected date
of closing of the transaction.
These forward-looking statements are not guarantees of future
results and are subject to risks, uncertainties and assumptions
that could cause actual results to differ materially and adversely
from those expressed in any forward-looking statement. Important
risk factors that may cause such a difference in connection with
the proposed transaction include, but are not limited to, the
following factors: (1) the risk that the conditions to the closing
of the transaction are not satisfied, including the risk that
required approvals for the transaction from governmental
authorities or the stockholders of Layne are not obtained; (2)
litigation relating to the transaction; (3) uncertainties as to the
timing of the consummation of the transaction and the ability of
each party to consummate the transaction; (4) risks that the
proposed transaction disrupts the current plans and operations of
Granite or Layne; (5) the ability of Granite or Layne to retain and
hire key personnel; (6) competitive responses to the proposed
transaction and the impact of competitive products; (7) unexpected
costs, charges or expenses resulting from the transaction; (8)
potential adverse reactions or changes to business relationships
resulting from the announcement or completion of the transaction;
(9) the combined companies' ability to achieve the growth prospects
and synergies expected from the transaction, as well as delays,
challenges and expenses associated with integrating the combined
companies' existing businesses; (10) the terms and availability of
the indebtedness planned to be incurred in connection with the
transaction; and (11) legislative, regulatory and economic
developments, including changing business conditions in the
construction industry and overall economy as well as the financial
performance and expectations of Granite and Layne's existing and
prospective customers. These risks, as well as other risks
associated with the proposed transaction, will be more fully
discussed in the proxy statement/prospectus that will be included
in the Registration Statement on Form S-4 that Granite will file
with the Securities and Exchange Commission ("SEC") in connection
with the proposed transaction. Investors and potential investors
are urged not to place undue reliance on forward-looking statements
in this document, which speak only as of this date. Neither Granite
nor Layne undertakes any obligation to revise or update publicly
any forward-looking statement to reflect future events or
circumstances. Nothing contained herein constitutes or will be
deemed to constitute a forecast, projection or estimate of the
future financial performance of Granite, Layne, or the combined
company, following the implementation of the proposed transaction
or otherwise.
In addition, actual results are subject to other risks and
uncertainties that relate more broadly to Granite's overall
business, including those more fully described in Granite's filings
with the SEC including its annual report on Form 10-K for the
fiscal year ended December 31, 2016, and Layne's overall business
and financial condition, including those more fully described in
Layne's filings with the SEC including its annual report on Form
10-K for the fiscal year ended January 31, 2017.
No Offer or Solicitation
This document does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
Additional Information and Where to Find It
In connection with the proposed transaction, Granite will file a
registration statement on Form S-4, which will include a
preliminary prospectus of Granite and a preliminary proxy statement
of Layne (the "proxy statement/prospectus"), and each party will
file other documents regarding the proposed transaction with the
SEC. The registration statement has not yet become effective and
the proxy statement/prospectus included therein is in preliminary
form. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. A definitive proxy statement/prospectus will be
sent to Layne's stockholders.
You may obtain copies of all documents filed with the SEC
regarding this transaction, free of charge, at the SEC's website
(www.sec.gov). In addition, investors and stockholders will be able
to obtain free copies of the proxy statement/prospectus and other
documents filed with the SEC by Granite on Granite's Investor
Relations website (investor.Granite.com) or by writing to Granite,
Investor Relations, 585 West Beach Street, Watsonville, CA 95076
(for documents filed with the SEC by Granite), or by Layne on
Layne's Investor Relations website (investor.laynechristensen.com)
or by writing to Layne Company, Investor Relations, 1800 Hughes
Landing Boulevard, Suite 800, The Woodlands, TX 77380 (for
documents filed with the SEC by Layne).
Participants in the Solicitation
Granite, Layne, and certain of their respective directors,
executive officers, other members of management and employees and
agents retained, may, under SEC rules, be deemed to be participants
in the solicitation of proxies from Layne stockholders in
connection with the proposed transaction. Information regarding the
persons who may, under SEC rules, be deemed participants in the
solicitation of Layne stockholders in connection with the proposed
transaction will be set forth in the proxy statement/prospectus
when it is filed with the SEC. You can find more detailed
information about Granite's executive officers and directors in its
definitive proxy statement filed with the SEC on April 25, 2017.
You can find more detailed information about Layne's executive
officers and directors in its definitive proxy statement filed with
the SEC on April 28, 2017. Additional information about Granite's
executive officers and directors and Layne's executive officers and
directors will be provided in the above-referenced Registration
Statement on Form S-4 when it becomes available.
1 Based on Granite's expectations for Layne financial
performance during calendar year 2018, and including full run-rate
cost synergies and expected present value tax benefit of Layne net
operating losses.
2 Adjusted EPS excludes non-recurring transaction and
integration costs and Adjusted Cash EPS further excludes
amortization of intangible assets.
3 Based upon Layne's approximate LTM water revenue as of Layne's
fiscal Q3 2018 (October 31, 2017) and Granite's three-year
water-related average revenue.
4 LTM figures as of Layne's fiscal Q3 2018 (October 31, 2017)
and pro forma for the divestiture of the Heavy Civil business
segment; Layne's fiscal year end is January 31.
5 U.S. Municipal Water Infrastructure: Utility Strategies &
CAPEX Forecasts, 2016 – 2025, Bluefield Research.
6 LTM figures as of Layne's fiscal Q3 2018 (October 31, 2017)
and pro forma for the divestiture of the Heavy Civil business
segment; Layne's fiscal year end is January 31. LTM figures as of
Granite's fiscal Q3 2017 (September 30, 2017); Granite's fiscal
year end is December 31.
7 Adjusted EPS excludes non-recurring transaction and
integration costs and Adjusted Cash EPS further excludes
amortization of intangible assets.
8 Assumes conversion of Layne 8.00% notes post-closing.
9 Outstanding Layne Equity awards to be cash settled at
closing.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180214005687/en/
Granite:MediaJacque Fourchy, 831-761-4741orInvestorsRon
Botoff, 831-728-7532orLayne:InvestorsJ. Michael Anderson,
281-475-2694Chief Financial
Officermichael.anderson@layne.comorMediaDennard Lascar
AssociatesJack Lascar, 713-529-6600jlascar@dennardlascar.com
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