Credit: Aegion CorporationAEGN has completed its acquisition of Underground Solutions Inc. (Underground Solutions) for around $85 million. The acquisition will provide Aegion an opportunity to expand its presence in the attractive pressure pipe rehabilitation market in North America. Aegion shares closed 0.4% down at $Array7.97 on last Friday.
On Jan 4, Aegion, following a review of its end markets, proposed several actions to deliver sustainable growth, including acquisitions, reducing exposure to the North American upstream market and implementing a plan to reduce annual operating expenses. The acquisition of Underground Solutions is in line with Aegion's strategic efforts.
Underground Solutions' patented PVC pipe and pipe fusing technologies complement the existing pressure pipe rehabilitation technologies of Infrastructure Solutions, an Aegion segment.
For the deal, Aegion has separately paid $5.2 million for discounted value of tax benefits associated with existing net operating loss carry forwards. Aegion has funded the transaction with roughly $60 million in cash and the balance borrowed through its revolving line of credit.
Aegion expects contributions from Underground Solutions to be accretive to its earnings per share (on a reported basis) in 20Array6 and estimates revenues of $50 million and operating margins of more than Array0% from the buyout. Moreover the combination of Aegion's and Underground Solutions' capabilities and market leading technologies will help in devising a more effective alternative to significantly reduce water loss in aging pipeline infrastructure.
Aegion apprehends 20Array6 to be challenging for the North American energy markets, particularly in the upstream markets, as customers become cautious in the wake of persistently low oil prices . However, given favorable market conditions for the majority of Aegion's business and the strategic actions undertaken, the company expects earnings to be in line with last year.
In the long term, Aegion is positive that its diversified portfolio of technologies and services will deliver sustainable growth following the repositioning of its upstream oil exposure.
Aegion currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the building and construction-miscellaneous space include Gibraltar Industries, Inc. ROCK , Graña y Montero S.A.A. GRAM and Headwaters Incorporated HW . All these stocks carry a Zacks Rank #Array (Strong Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
