Granite Construction Incorporated (NYSE: GVA) announced Dec. 28 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, according to a press release.
Founded in 1927, Kenny is a privately owned, Northbrook, Ill.-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 percent of revenues associated with the power sector, 20 percent associated with tunneling-related work and 30 percent coming from water/underground and other heavy/civil related work. As of Dec. 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.”
Under the terms of the definitive agreement, Granite will pay the purchase price of $130 million in cash at closing in exchange for 100 percent 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 was to become effective on Dec. 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.