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Aecon to Sell Interest in Cross Israel Highway Concession for $77.8 million While Retaining Interest in Operating Company

Jul 15, 2010
Consortium led by Israel Infrastructure Management to acquire Aecon’s 25% interest in Derech Eretz Highways (1997) Ltd

Toronto, ON– July 15, 2010Aecon Group Inc. (TSX:ARE) announced today that it has signed an agreement with a consortium headed by Israel Infrastructure Management (the IIM consortium) to sell its 25% interest in the Cross Israel Highway concessionaire, Derech Eretz Highways (1997) Ltd (DEC) for $77,781,720, subject to certain adjustments on closing. The transaction is expected to close in the fourth quarter of 2010.

The transaction remains subject to various third party approvals, including consents to waive rights of first refusal and tag-along rights held by Aecon’s existing partners – Africa Israel Investments Ltd (37.5%) and Shikun & Binui Holdings Ltd. (37.5%) as well as approval by the State of Israel and DEC’s senior lenders. 

Excluded from the transaction are Aecon’s interests in Derech Eretz Highways Management Corporation Limited, the operator of the Cross Israel Highway, in which Aecon holds a 30.6% interest, as well as Aecon’s interests in several affiliates of the operator that operate other transportation infrastructure assets in Israel.

“We believe this opportunity to monetize our equity interest in this concession is an affirmation of both the appreciated value of this investment and of the risk/reward participation model that was pioneered in the development of the Cross Israel Highway to align the interests of constructors, owners, funders and operators of this type of infrastructure asset,” noted John M. Beck, Aecon’s Chairman and CEO. “I am grateful to all of the people at Aecon, as well as our partners in DEC, the DEC management team and the project’s sponsors in the State of Israel, who made our participation in this very successful and innovative project possible.”

“It was just over 10 years ago that we made our investment in DEC and began construction on the Cross Israel Highway” said Scott Balfour, President of Aecon Group Inc. “The monetization of this equity investment is expected to generate net after tax cash proceeds of between $65 and $70 million for Aecon and an after tax gain of approximately $30 million. These gains, which are in addition to the profits Aecon earned from its role in the construction of the project, highlight the merits of our strategy to participate in select public/private partnership projects as both developer and contractor.”

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 on a selected basis internationally. Aecon is pleased to be recognized as one of the 50 Best Employers in Canada as published by Report on Business Magazine.