Back to top

Analyst Blog

Aegion Corporation (AEGN - Snapshot Report) has entered into an agreement to buy Brinderson, L.P. The company will acquire shares of Brinderson and its related entities for roughly $150 million. The acquisition is expected to close on or around July 1, 2013.

Headquartered in Costa Mesa, Calif., Brinderson is a leading integrated service provider of maintenance, construction, engineering and turnaround activities for the upstream and downstream oil and gas markets. The acquisition will help Brinderson to enter new markets and support the continued growth in its West Coast market. Brinderson's senior management team, including its President and Chief Executive Officer (CEO), Russell Conda, will remain with the company after the deal closes.

Aegion, however, will benefit from the combined strength of Brinderson’s safety records, strong reputation and comprehensive solutions. Aegion, with the help of Brinderson’s long-term association with large and blue chip companies, will get access to the upstream and downstream markets. Aegion will be able to preserve and rehabilitate its vital pipeline assets. It will also assist the company to compete for its energy value chain, which is worth around $800 to $900 million along with maintaining the facilities used for processing and refining oil and gas products of its Energy & Mining platform.

As of Mar 31, 2013, Brinderson’s revenues were around $231 million and adjusted EBITDA was $23.8 million. Almost 75% of revenue comes from recurring activities comprising long-term projects. On the other hand, Aegion derived around 45% of its total revenue from recurring activities of its Energy & Mining platform. However, the acquisition will aid 5% more revenues to the Energy & Mining segment.

Aegion expects the acquisition to be modestly accretive in 2013, while it will be more accretive in 2014. Aegion maintains its earnings per share guidance for 2013 in the range of $1.60 to $1.80, excluding $4 to $7 million expenses related to the acquisition. The company has lowered its outlook for Return on invested capital (ROIC). The new ROIC is expected to be in the range of 7% to 8% for 2013, driven by the increase in intangible assets and a partial earnings contribution from Brinderson. It also expects the acquisition to be accretive to free cash flow in 2013 as a result of Brinderson’s low capital expenditure requirements.

Aegion’s results for 1Q13 ranked lowest in terms of earnings with a meager contribution of 10% of total earnings for the year, due to delays caused by weather and the seasonal low period for many of its businesses. Given the favorable outlook of its markets, Aegion expects to make up for this slow start to the year during the balance of 2013 on the back of its strong backlog and a robust bid table supporting the opportunity for securing additional projects. However, the Brinderson acquisition marks the beginning of a strategic effort to expand its capabilities in the US energy market.

Chesterfield, Mo.-based, Aegion has revised its current credit facility for the transaction. In addition, the company is working with its lending partners, Bank of America, N.A. (BAC - Analyst Report), J.P. Morgan Chase Bank N.A. (JPM - Analyst Report) and U.S. Bank National Association (USB - Analyst Report) to introduce a new and expanded credit facility. The new facility will fund the transaction. It will also provide sufficient flexibility for the future liquidity needs and growth prospects of Aegion.

Aegion Corporation provides proprietary technologies and services to protect against the corrosion of industrial pipelines and for the rehabilitation and strengthening of water, wastewater, energy and mining piping systems and buildings, bridges, tunnels and waterfront structures.

Aegion currently holds a Zacks Rank # 3(Hold).
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%
STRATTEC SE… STRT 80.24 +3.00%