Stock Monitor: Layne Christensen Post Earnings Reporting
LONDON, UK / ACCESSWIRE / February 16, 2018 / Active-Investors.com has just released a free research report on Granite Construction Inc. (NYSE: GVA) ("Granite"). If you want access to this report all you need to do is sign up now by clicking the following link www.active-investors.com/registration-sg/'symbol=GVA as the Company's latest news hit the wire. On February 14, 2018, the Company announced that it has signed an agreement to acquire all outstanding shares of Layne Christensen Company (NASDAQ: LAYN) ("Layne"). The all-stock deal is valued $565 million including assumption of Layne's net debt. Register today and get access to over 1,000 Free Research Reports by joining our site below:
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Active-Investors.com is focused on giving you timely information and the inside line on companies that matter to you. This morning, Granite Construction and Layne Christensen most recent news is on our radar and our team decided to put out a fantastic report on the company that is now available for free below:
www.active-investors.com/registration-sg/'symbol=GVA
www.active-investors.com/registration-sg/'symbol=LAYN
Terms of the deal
As per terms agreed by both companies, Granite will pay Layne's shareholders 0.270 Granite's shares for each Layne's share they own. This values each Layne's share at $17 and represents a 33% premium based on the volume-weighted average prices for Granite's and Layne's shares over the past 90 trading days. Once the transaction closes, Layne's shareholders will own approximately 12% stake in Granite on a fully diluted basis. As part of the transaction, Granite will issue approximately 5.4 million shares to Layne's shareholders. The deal has been approved unanimously by the Boards of Directors of both companies. The deal is expected to close in Q2 2018 and is subject to shareholders and regulatory approvals and other closing conditions. Wynnefield Capital which owns nearly 9% stake in Layne has agreed to vote in favor of the deal. Once the deal is closed, Granite will expand its Board with the addition of one director from Layne. The merged Company is expected to have an employee strength of over 7,000 people.
Granite has agreed to assume approximately $170 million of Layne's outstanding convertible debt and agreed to abide by the existing terms and maturity date of this debt. Granite expects to meet the cash requirements of the deal which is approximately $70 million, using a mix of cash in hand and the Company's existing revolving credit facility. Granite is confident of maintaining investment grade credit profile and financial flexibility after the completion of the deal.
Management Comments
Sharing his views on the acquisition James H. Roberts, President and CEO of Granite, said:
"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."
Michael J. Caliel, President and CEO of Layne, stated:
"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."
Financial benefits of the acquisition
Granite expects the deal to result in annual run-rate cost savings of approximately $20 million within three years of closing of the deal. Out of this, nearly one-third of the amount is expected as savings in FY18. The deal is expected to have a one-time cost of approximately $11 million.
The acquisition is expected to be accretive to Granite's adjusted earnings per share (EPS) and a high single digit accretive to Granite's cash EPS within one year of closing.
The combined company is expected to have a strong balance sheet, liquidity profile, and it is confident of maintaining its investment grade credit profile.
The strong cash flows generated by the merged company will allow Granite to reduce its debts significantly by end of FY18.
Advantages for the merged Company
The acquisition enhances Granite's presence in the large and growing water infrastructure market. The merged company will have the #1 position in well drilling and a #2 position in cured-in-place pipe (CIPP) rehabilitation. The merged company's water-related revenues are expected to be approximately $600 million, including revenues from Granite's existing water business. Its target customer base is the municipal, industrial, agriculture, and energy end-markets. Layne's 80% revenues come from this target base. Post the merger, Granite will be able to secure its position as a leader in water infrastructure and wastewater rehabilitation. Given that the US municipal utility sector is forecasted to spend $532 billion till 2025, of which 50% is earmarked as spending for water and wastewater distribution networks, this acquisition is an attractive market opportunity for Granite.
Granite has been strengthening its portfolio of services and presence in the water and wastewater market via strategic acquisitions over the years. With the acquisition of Layne, the Company will be better positioned in water infrastructure and wastewater rehabilitation segment.
The merged Company will have a broader product portfolio and a nationwide footprint across the US in the transportation market. Granite currently has a backlog of projects valued over $3.7 billion. The addition of Layne's business will enable Granite to reach out to newer markets, especially in the Midwest.
Layne's business is expected to contribute approximately 14% of the revenues of the merged Company. The acquisition allows Granite to strengthen its business and open new funding sources.
About Granite Construction Co.
Watsonville, California-based Granite is one of the largest diversified construction and construction materials Companies in US. The Company 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.
About Layne Christensen Co.
The Woodlands, Texas-based Layne is a global water management, construction, and drilling Company and provides responsible solutions for water, mineral and energy challenges. Its area of operation is throughout North America, Africa, Australia, Europe, Brazil, and in other South American countries through its affiliates. Layne has a responsible solution for any water management challenge including identifying and developing a new water source, delivering usable water to communities and facilities around the world, recycling water from oil and gas resources, rehabilitating an existing pipeline, or safely returning wastewater to the natural environment.
Stock Performance Snapshot
February 15, 2018 - At Thursday's closing bell, Granite Construction's stock climbed 2.85%, ending the trading session at $57.67.
Volume traded for the day: 934.80 thousand shares, which was above the 3-month average volume of 243.28 thousand shares.
Stock performance in the previous six-month period - up 13.30%; and past twelve-month period - up 4.78%
After yesterday's close, Granite Construction's market cap was at $2.27 billion.
Price to Earnings (P/E) ratio was at 43.96.
The stock has a dividend yield of 0.90%.
The stock is part of the Industrial Goods sector, categorized under the Heavy Construction industry. This sector was up 1.5% at the end of the session.
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