Toronto, Ontario – December 15, 2008: Aecon Group Inc. (“Aecon”) (TSX:ARE) today announced that it has signed a share purchase agreement with South Rock Ltd., an established infrastructure construction business in Alberta focusing primarily on the Southern Alberta roadbuilding market.
A private company founded in 1973, South Rock is an integrated construction and materials business headquartered in Medicine Hat, Alberta. It is one of the largest and most reputable firms of its kind in Alberta, with annual revenues of approximately $150 million per year.
Under the share purchase agreement, Aecon will assume South Rock’s existing debt of approximately $9 million and, subject to certain post closing adjustments, pay approximately $35 million for all outstanding shares of the company. The transaction is scheduled to close on January 15, 2009, subject to a number of regulatory approvals and other conditions.
In addition to its Medicine Hat office, South Rock has a regional office, materials testing lab and equipment repair facility in Calgary, a 7.5 acre equipment yard and repair facility in Medicine Hat, 10 sand and gravel pits across Southern Alberta with total reserves of approximately 7 milliontonnes, four asphalt production facilities (two of which are portable), and a fleet of about 600 pieces of construction equipment.
The addition of South Rock will more than double the capacity of Aecon’s civil construction operations in Alberta, complement Aecon’s primarily northern Alberta presence in southern Alberta, substantially boost its equipment fleet, and for the first time give Aecon strategically important aggregate reserves in Alberta. The acquisition adds more than $100 million to Aecon’s backlog, and positions the Infrastructure division for strong growth in the Alberta market, with divisional revenues in the province expected to reach approximately $250 million in 2009.
“This is a very significant acquisition for Aecon”, said Scott Balfour, President and CFO of Aecon Group Inc. “The expansion of our construction and materials capabilities in the Alberta market has been a strategic priority for us, and this acquisition solidifies our competitive profile in a market with a strong demand for infrastructure investment.”
“Foremost among the many attractive aspects of this acquisition is the excellent cultural fit between our two companies, and the strong management team that Aecon inherits,” said Teri McKibbon, CEO of Aecon’s Infrastructure division. “We’ve had a close relationship with South Rock in this market since we began working with them as a subcontractor on Calgary’s Stoney Trail. They are a very well managed company with a shared vision of safety, quality and reliable execution.”
The current management team of South Rock will remain in place, including President Merv Boychuk, who will continue to manage the company along with his two South Rock partners Rick Englot and Mick Nodwell. Together, the three executives owned 50% of South Rock shares prior to the acquisition.
“We are truly excited about South Rock joining Aecon’s Infrastructure Group”, stated Merv Boychuk. “Together, Aecon and South Rock will be able to expand our service offering, and grow the business throughout Alberta. We see many new opportunities for South Rock Ltd and its employees. ”
The acquisition provides Aecon with significant potential in the civil construction market in a province where it has been re-establishing its presence since opening a new civil construction office in 2006. The acquisition provides Aecon with the opportunity to significantly increase its revenue base by expanding the full service capabilities of South Rock, without corresponding increases in overhead or SG&A costs.
Aecon’s Infrastructure division is currently working for Alberta Transportation to twin a 13-kilometre section of Highway 21 near Edmonton. The $81-million contract is the largest civil construction project Aecon has received in Alberta since opening its civil construction office there two years ago. Aecon’s other civil construction projects in Alberta include: construction of 5 bridges for Calgary’s new ring road, an open cut tunnel for Edmonton’s LRT, and construction of underground piping and other civil works for Shell Canada at its Scotford Refinery, as well as projects undertaken jointly with Aecon’s Industrial division.
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. Aecon is pleased to be recognized as one of the 50 Best Employers in Canada as published by Report on Business Magazine and as one of Canada’s Top 100 Employers as published in Maclean’s Magazine.