Transaction Highlights
- Total potential consideration (cash / stock / notes / earn-out)
of $82.6 million
- Rockford currently engaged as subcontractor in Ruby Pipeline
natural gas project, which is expected to generate total
post-closing revenues of approximately $200 million in 2010 and
2011
- Acquisition expected to be accretive to earnings
Primoris Services Corporation (Nasdaq:PRIM)
("Primoris" or the "Company") today announced that it has signed a
definitive agreement to acquire privately held Rockford Corporation
("Rockford"). Based in Hillsboro (Portland), Oregon, Rockford
specializes in large diameter natural gas and liquid pipeline
projects and related facilities construction. Closing of the
transaction, which is subject to customary conditions, is expected
to occur on or before November 12, 2010, with the effective date of
the acquisition retroactive to October 1, 2010. The sellers
include several private equity firms and two senior members of
management.
Total consideration is approximately $82.6 million, $64.2
million of which will be paid at closing consisting of: $35
million in cash; $12.5 million of Primoris common stock, the value
of which will be calculated using the average closing stock price
for the 20 trading days prior to closing; and three-year $16.7
million promissory notes with escalating interest of 5% to 8% with
certain prepayment and conversion features. The
definitive agreement also contains incentive provisions that could
provide additional consideration of cash and Primoris common stock
totaling $18.4 million based on Rockford attaining specified
financial goals for the three years ending December 31, 2010, 2011
and 2012.
For its fiscal year ended March 31, 2010, Rockford generated
revenues of approximately $166.0 million and an operating profit of
approximately $24.0 million. At September 30, 2010, Rockford's
balance sheet included stockholders' equity of $39.0 million,
working capital of $16.6 million, and cash and equivalents of
approximately $26.8 million.
In June 2010, Rockford began working under a cost-plus contract
awarded by El Paso Corporation to construct 126 miles of 42-inch
natural gas transmission pipeline for the Ruby Pipeline Project,
the first-ever natural gas pipeline to be constructed and operated
as carbon-neutral. The Ruby Pipeline Project, which includes
several other pipeline contractors, consists of a total of
approximately 680 miles of 42-inch natural gas pipeline beginning
at the Opal Hub in Wyoming and terminating at interconnects near
Malin, Oregon. The Ruby Project has an initial design capacity of
up to 1.5 billion cubic feet of natural gas per day (Bcf/d) and
will traverse portions of Wyoming, Utah, Nevada, and Oregon.
Rockford expects to complete its portion of the Ruby Pipeline
Project, passing through the states of Nevada and Oregon, by summer
2011.
Driven largely by the Ruby Pipeline Project, Primoris believes
that Rockford could add revenues to Primoris of approximately $65
million in the fourth quarter of 2010 and revenues in excess of
$135 million in 2011. Primoris also believes that the
acquisition will be immediately accretive, with the potential for
significant earnings accretion beginning in the fourth quarter of
this year and continuing through the second quarter of 2011, the
approximate date at which Rockford is expected to complete its work
under the Ruby Pipeline contract.
The incentive provisions contained in the definitive agreement
take into account the impact of the Ruby Pipeline Project, as well
as results of future work by Rockford's core operations.
These incentives could provide additional merger
consideration of cash and Primoris common stock totaling $18.4
million based on Rockford attaining the following EBITDA, as
defined in the definitive agreement:
- EBITDA of $9.0 million for the three months ended December 31,
2010 would result in the issuance of $4.6 million of Primoris
common stock to the sellers.
- EBITDA of $34.0 million for the five quarters ending December
31, 2011 would result in additional consideration of $4.6
million to the sellers, divided equally between Primoris common
stock and cash. Should EBITDA for this period meet or exceed
$38.0 million, the sellers would receive additional consideration
of $2.3 million, also divided equally between Primoris common stock
and cash.
- EBITDA of $14.0 million for 2012 would result in a cash payment
to the sellers of $6.9 million.
Following the completion of the acquisition, Rockford will
become a wholly owned subsidiary of Primoris, and its current
management team, led by Frank Welch, will continue to operate the
business.
Brian Pratt, Chairman, President and Chief Executive Officer of
Primoris, commented, "The addition of Rockford extends our service
reach into the Pacific Northwest and complements our specialized
underground pipeline capabilities by adding a company that is
primarily focused on larger-scale mainline pipeline and facilities
construction. There is very little overlap in our respective
service areas, which should facilitate the introduction of
Primoris's service portfolio into these new territories. Rockford
has earned a reputation for quality and dependability over its
40-year history, and we look forward to working with the management
team to increase its operations. Approximately 25% of the
total consideration consists of Primoris stock, which aligns the
interests of the Rockford team with all shareholders and reflects
our shared confidence in the long-term outlook for our combined
Company. We believe that this acquisition will be accretive
without putting undue stress on our balance sheet."
Additional information regarding Primoris's acquisition of
Rockford will be available in a Form 8-K filing by Primoris on or
about November 12, 2010. Further details of the transaction,
including pro forma financial information and other data, will be
included in a Form 8-K expected to be filed prior to the end
of January 2011. These filings will be available at the
Securities and Exchange Commission's web site, www.sec.gov, and at
the "Investor Relations" section of Primoris's web site at
www.prim.com.
ABOUT ROCKFORD
Founded in 1967 and headquartered in Hillsboro, Oregon, Rockford
is a full-service provider of oil and gas pipeline construction,
pipeline maintenance, directional drilling, compressor station and
storage work, and facilities support. Rockford is licensed, or has
licenses pending, to conduct business in 40 states. For
more information, please visit
www.rockfordpipelines.com.
ABOUT PRIMORIS
Primoris, through various subsidiaries, is one of the largest
specialty contractors and infrastructure companies in the United
States. Serving diverse end markets, Primoris provides a wide
range of construction, fabrication, maintenance and replacement
services, as well as engineering services to major public
utilities, petrochemical companies, energy companies,
municipalities and other customers. With the recent acquisition of
James Construction Group, Primoris has a significant presence in
the Gulf States region where it provides heavy civil construction
services. Primoris is also a leading water and wastewater
contractor in the state of Florida, and a specialist in designing
and constructing complex commercial and industrial concrete
structures in California. For additional information on Primoris,
please visit www.prim.com.
The Primoris Services Corporation logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=5527
FORWARD LOOKING STATEMENTS
This press release contains certain forward-looking statements,
including with regard to the Company's future performance. Words
such as "estimated," "believes," "expects," "projects," "may," and
"future" or similar expressions are intended to identify
forward-looking statements. Forward-looking statements
inherently involve risks and uncertainties, including without
limitation, those described in this press release and those
detailed in the "Risk Factors" section and other portions of our
Annual Report on Form 10-K for the year ended December 31, 2009 and
other filings with the Securities and Exchange Commission,
including the Form 8-Ks discussed above expected to be filed on or
about November 12, 2010 and prior to the end of January 2011, and
the Company's Form 10-Q expected to be filed on November 9,
2010. Primoris does not undertake any obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
may be required under applicable securities laws.
CONTACT: Primoris Services Corporation
Peter J. Moerbeek, Executive Vice President,
Chief Financial Officer
(949) 454-7121
pmoerbeek@prim.com
The Equity Group Inc.
Devin Sullivan, Senior Vice President
(212) 836-9608
dsullivan@equityny.com
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