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North American Construction (NOA) to Buy DGI, Diversify Offerings

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North American Construction Group Ltd. (NOA - Free Report) or NACG has been pursuing strategic acquisitions in order to vertically integrate its capital maintenance program and diversify service offerings. To that end, the company has inked a deal with DGI Trading Pty Limited to acquire all its assets for $23.5 million.

Following the news, the company’s shares rose nearly 2.6% in the pre-market trading session. Meanwhile, shares of NACG have outperformed the industry in the past three months. The company’s shares have gained 18.8% compared with the industry’s 7.2% growth in the said period.

The transaction, which represents an EBITDA multiple of 3x on a next 12-month basis, is expected to be sealed on Jul 1, 2021 and will be funded through the existing debt facilities.

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Joe Lambert, President & Chief Executive Officer of NACG, said “NACG has worked with David and his team at DGI for many years and have great respect for their skills and the integrity with which they conduct business. We welcome the DGI team into our NACG family and are very excited to work together to grow and expand the services provided both externally and internally.”

DGI supplies production-critical components to the mining industry through business relationships and a complex logistical network. DGI has connections in 10 key countries, which helps the company in more agile and economical connectivity.

Importantly, Kempsey, NSW, Australia-based DGI will operate as NACG’s wholly-owned subsidiary, and retain its brand identity as well as personnel. Following the transaction’s closure, the company will have access to new jurisdictions through DGI’s network and experience.

At 2018-end, it acquired 31 used ultra-class haul trucks from an existing oil sands client. Again in November 2018, NACG acquired all assets related to the Contract Mining business of Aecon Group Inc. All these buyouts have been contributing to NACG’s EBITDA, free cash flow and earnings since 2019.

Zacks Rank

NACG — which share space with Dycom Industries, Inc. (DY - Free Report) , Great Lakes Dredge & Dock Corporation, (GLDD - Free Report) and Primoris Services Corporation (PRIM - Free Report) in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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