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Aecon acquires The Karson Group

Feb 1, 2007

Toronto, Ontario – February 1, 2007: Aecon Group Inc. (“Aecon”) (TSX:ARE) today announced that it has acquired The Karson Group, one of the largest aggregate, asphalt and civil construction companies in Eastern Ontario.


A private company owned primarily by its founder and CEO, William Karson, The Karson Group is an integrated construction and materials company comprised of Karson Construction, Karson Asphalt Paving Inc. and Spratt Aggregates (Karson Aggregates). It is the third largest company of its kind in the Ottawa / Eastern Ontario market, with annual revenues generally in the $35 to $50 million range in recent years.


Under the share purchase deal, Aecon will assume The Karson Group's existing debt of approximately $5 million and, subject to certain post closing adjustments, pay approximately $37 million, of which approximately $22 million will be financed by the Vendor and paid over a 5- year term.


The Karson Group's substantial asset base includes approximately 1000 acres of land that holds an asphalt plant and associated assets as well as 4 owned limestone quarries that contain approximately 215 million tonnes of licensed reserves and 7 owned/leased sand and gravel properties that contain approximately 7 million tonnes of licensed reserves. The business also includes approximately 350 pieces of construction equipment.


The addition of The Karson Group's aggregates operation will nearly triple Aecon's total aggregate reserves, and make Aecon one of Ontario's five largest aggregate producers and three largest asphalt producers.


“This is a very significant acquisition for Aecon”, said Scott Balfour, President and CFO of Aecon Group Inc. “Aecon's materials operation has been a strategically important and profitable component of our business for decades, and the addition of The Karson Group's substantial reserves and asphalt production capabilities solidifies our competitive profile in one of Canada's largest regional markets for decades to come.”


“We are very proud that Mr. Karson and the other shareholders of The Karson Group have chosen Aecon as the successor of this business,” said Teri McKibbon, President of Aecon's Civil and Utilities Group. “We have had a relationship with The Karson Group in this market for many years and know it to be one of the top privately managed companies in the industry.”


The current management team of The Karson Group will remain in place, including William Karson, who will continue to manage the company.


“I am truly excited about the Karson Group joining Aecon's Civil and Utilities Group. There will be tremendous future synergies and opportunities for our customers and employees as the combined business significantly expands the service offering of the Karson Group in the Ottawa area”, added William Karson, founder and President of the Karson Group.


In addition to four other aggregate properties across Southern Ontario, Aecon currently owns a limestone quarry in the east end of Ottawa, which will be integrated into The Karson Group's holdings. This integration will produce a number of important synergies, including the efficiencies gained through combined management, increased equipment utilization and fleet efficiency, improved purchasing power, and a better geographic balance in aggregate supply to support construction operations in the region.


The acquisition also provides Aecon with significant potential in the civil construction market in a region where Aecon has typically entered only on a selected basis – usually to serve Ontario's Ministry of Transportation (MTO) or in specialized heavy civil projects. The Karson Group's civil construction business, which is focused on the municipal, industrial and ‘private works' sectors, has virtually no overlap with Aecon's focus in the region. As such, this acquisition will result in substantial increases in construction capabilities and capacity in this market. It will also provide increased internal requirements for other Aecon business units such as its growing utilities businesses in the region, its traffic technology business (AGI Traffic Technologies) and its materials engineering business (AME Materials Engineering).


Overall, the acquisition provides Aecon with the opportunity to significantly increase its revenue base by expanding the full service capabilities of The Karson Group, without corresponding increases in overhead or SG&A costs. It also provides Aecon with the potential future real estate development opportunities associated with The Karson Group's approximately 1000 acres of property in Ottawa's west end.

Aecon Group Inc. is Canada's largest publicly traded construction and infrastructure development company. Aecon and its subsidiaries provide services to private and public sector clients throughout Canada and internationally. The Company's shares are listed for trading on the Toronto Stock Exchange under the symbol ARE.