North American Construction Group announces expansion of heavy construction fleet

North American Construction Group has entered into a purchase and sale agreement to acquire the heavy construction fleet and related assets of Aecon Group Inc. — Photo courtesy Aecon

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 applies.

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.