Granite Construction to acquire Layne Christensen in $565M stock merger
Granite Construction Incorporated (GVA) and Layne Christensen Company (LAYN) announced 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 EBITDA.
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.
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 closing.
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 shares of Granite common stock to Layne common stockholders.
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This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.