Granite Construction Inc. (GVA) has agreed to acquire Kenny Construction Co., a national contractor and construction manager specializing in the power, tunnel, water and civil markets, for $130 million. Pursuant to the deal, Granite would pay $130 million cash at closing in return for 100% of Kenny's outstanding shares. Granite said it would receive a tax "step up" in the assets of Kenny and its divisions may provide future tax benefits to Granite. These benefits imply an effective purchase price of 5.0x Kenny's projected 2012 EBITDA.
Granite would finance the transaction via. a combination of cash and available borrowings as per its existing revolving credit facility. The transaction has been closed in escrow and would become effective on December 31, 2012. One-time costs related to the Kenny acquisition are projected to be nearly $5 million and would be recorded in the fourth quarter 2012, the company added.
Including integration costs and the impact of intangible amortization, the transaction may be break-even to Granite's 2013 earnings per share; while 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, whereas the final allocation would be determined after completion.
BofA Merrill Lynch is acting as financial advisor to Granite in connection with the transaction. FMI Corp. is acting as financial advisor to Kenny.
by RTT Staff Writer
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