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January 9, 2009
Table of Contents
I.
Introduction
II.
Infrastructure Trends
III.
IV.
V.
The Takeaway
Appendix
The foregoing material was prepared for informative purposes only and is not an offer to buy or sell any securities. Information contained in the document
was derived from sources considered reliable, but has not been independently confirmed or verified. The opinions expressed are the personal opinions of the
author, they do not necessarily reflect the opinions of any other person or entity, and they are subject to change without notice. Past performance is no
guarantee of future results.
Stephens Inc. 300 Crescent Court, Suite 600 Dallas, TX 75201 Phone (800) 643-9691 Fax (214) 258-2750
Introduction
Introduction
As the largest privately held investment bank off Wall Street, Stephens Inc. is dedicated to serving the advisory
needs of its diverse middle-market clients.
The Basic Materials & Construction Services team covers multiple sectors including Building Products,
Engineering and Construction, Cement and Aggregates, Metal Distribution and Fabrication, Plastic and Rubber
Products, Paper and Packaging, Coatings and Adhesives, Specialty Materials, and Capital Equipment.
Despite the current economic recession and softened construction forecast for 2009, we believe infrastructure as a
whole will experience growth in 2009 and 2010. Infrastructure investment has been recognized as a key
component of President-elect Obamas expected stimulus plan.
We have developed a public company valuation scorecard to identify the beneficiaries of infrastructure
spending and to provide guidance on expected valuations for private companies that possess desirable
public company attributes.
We have also examined recent capital markets activity to determine if current conditions are favorable for
public or private firms to consider raising capital or ownership alternatives.
As industry specialists, we remain bullish on the overall sector and are ready to deploy the necessary resources to
assist you in your advisory needs.
For additional information or to discuss our findings in more detail, please contact any of the following team
members.
214.258.2747
214.258.2748
214.258.2708
214.258.2749
Infrastructure Trends
Infrastructure Definition
The term infrastructure can include various types of construction and maintenance services. For purposes of this
report, infrastructure includes highways and streets, water supplies, wastewater systems, storm drainage systems,
mass transit, and airports, which are expected be the primary beneficiaries of President-elect Obamas economic
stimulus proposal. Under some definitions; Institutional and Utilities would also be included.
Residential
Construction
Commercial &
Manufacturing
Institutional
& Other
- Single Family
Housing
- Educational
Buildings
- Multifamily Housing
- Office Buildings
- Healthcare Facilities
Public Works
(Infrastructure)
- Highways & Bridges
- Power Plants
- Environmental
- Transmission Lines
Drinking Water
Waste Water
Treatment
- Wind Farms
Sewers / Storm
Drainage
- Manufacturing
Buildings
River / Harbor
Development
- Other Public Works
Mass Transit
Airports
Utilities
- Telecom
$110.0
$99.0
$100.0
$91.0
$90.0
Spending ($ in bil.)
$82.0
$76.0
$80.0
$70.0
$60.0
$50.0
$39.0
$37.0
$40.0
$28.0
$30.0
$77.0
$75.0
$28.0
$33.0
$30.0
$20.0
$10.0
$2002
2003
2004
2005
2006
2007
Significant Needs
180.0%
171.4%
160.0%
140.0%
Increase, 1982 to 2006
120.0%
94.5%
100.0%
80.0%
52.4%
60.0%
40.0%
28.4%
36.2%
20.0%
6.6%
0.0%
Population
1.
2.
Drivers
Vehicles
Vehicle Miles
Traveled
$45.0
$42.0
$42.5
$40.0
$40.0
$40.0
$38.0
$36.0
$37.5
($ in bil.)
$34.0
$35.0
$32.5
$30.0
$27.5
$25.0
2004
2005
2006
2007
2008
2009
Investment Shortfall
Current SAFETEA-LU
New Legislation
$60.0
$50.0
($ in bil.)
$40.0
$30.0
$20.0
$10.0
$-
2004
2005
2006
2007
2008
2009
Minimum Needs
2010
2011
2012
2013
SAFETEA-LU
2014
2015
Source, $12.8
Other, $2.3
Storage, $24.8
Treatment, $53.2
Transmission &
Distribution, $183.6
Investment Shortfall
Storm Water
Management,
$9.0
Sewer Overflows,
$54.8
Waste Treatment
Systems, $134.4
Source: U.S. EPA
* Estimated over the next 20 years
President-elect Obamas economic stimulus plan is estimated to be $500 - $700 billion (as high as $850 billion), of
which $100 - $200 billion is expected to be earmarked for infrastructure spending.
During the Nov. 4, 2008 elections voters approved more than $70.0 billion in state and local transportation funding.
Economic Impact
Project
$17.35
Water/Wastewater
$15.37
Community Development
$12.68
Transit
$7.07
$6.27
Energy/Green Jobs
Airports
$4.04
School Modernization
$3.73
Public-Safety Jobs/Technology
10
1.
Public-Housing Modernization
Amtrak
$3.70
$1.90
$1.06
WA
NH
MT
VT
ND
OR
MA
WI
ID
SD
NY
MI
WY
IA
PA
NE
NV
IL
UT
ME
MN
OH
IN
WV
CO
CA
RI
CT
NJ
DE
MD
KS
VA
MO
KY
NC
AZ
OK
NM
TN
AR
SC
MS
TX
AK
AL
GA
LA
HI
FL
23 states have passed legislation allowing government officials to sell or lease roads, highways, and airports.
The U.S. market for private investments in infrastructure assets via PPPs is still relatively immature.
Globally, nearly $94 billion of infrastructure funds, which provide private sector investments in infrastructure
assets, are in or coming to the market in the next 12 months.1
Over the past two years, roughly 30 dedicated funds have been launched, and $40 - $60 billion of equity capital has
been raised for investing in infrastructure assets in Europe and North America.1
1.
13
Aggregates / Cement Producers trade at higher EBIT multiples due to limited supply, strong demand, and
resilient pricing.
DE and CAT enjoy expanded multiples due to global demand, branded products, as well as diverse end markets
including mining, agriculture, energy, and forestry.
Construction Companies and Specialty Construction Services firms multiples have been negatively impacted by
exposure to commercial and retail projects and declining backlogs.
Size is important as smaller companies are negatively impacted by cyclicality and profitability of large projects.
Construction Companies
Infrastructure Product
Manufacturers
35.0x
30.0x
23.4x
25.0x
20.0x
17.3x
17.3x
16.4x
15.1x
15.0x
12.8x
13.2x
12.4x
11.2x
9.9x
10.0x
8.1x
7.2x
9.0x
8.5x
9.5x
9.2x
8.1x
8.9x
6.8x
6.5x
5.0x
3.9x
5.0x
3.5x
7.4x
7.8x
7.7x
6.2x
5.3x
5.2x
4.8x
9.0x
7.6x
3.8x
3.3x
3.0x
1.5x
N/M
0.0x
GVA
URS
STRL
FLR
ARE
LAYN
PCR
KBR
WG
VMC
MLM
EXP
TXI
CX
HOLN USLM
TRN
RMIX
DE
14
CAT
CNH
ASTE
TEX
MTW
INSU
PWR
DY
IESC
MTZ
MYRG
EME
CBI
MWA NWPX
VMI
AMN
FSTR
15
% of
52 - Week
High Price
8,959.1
3,323.1
2,759.2
1,597.4
1,256.1
463.6
429.7
437.6
248.6
49.36
39.80
17.08
41.75
24.96
9.11
22.15
11.18
18.88
72.6%
99.6%
74.6%
96.9%
117.0%
89.8%
113.8%
107.8%
145.2%
101.9%
48.7%
79.7%
42.6%
83.5%
55.2%
52.0%
38.0%
23.3%
82.4%
56.2%
HOLN
CX
VMC
MLM
TRN
TXI
EXP
USLM
RMIX
Average
15,133.1
8,001.0
6,939.2
4,139.2
1,350.5
836.6
842.6
155.1
128.1
57.56
10.29
63.00
99.92
16.98
30.38
19.35
24.51
3.49
49.8%
156.6%
59.4%
70.5%
81.8%
57.2%
48.7%
24.4%
90.7%
71.0%
54.7%
31.6%
62.8%
79.7%
41.3%
37.8%
49.8%
53.8%
55.8%
51.9%
CAT
DE
CNH
TEX
MTW
ASTE
Average
26,554.4
19,079.9
4,368.2
1,683.5
1,093.6
669.0
44.02
45.18
18.40
17.74
8.39
29.86
37.8%
58.5%
67.3%
97.8%
84.0%
75.6%
70.2%
51.2%
47.6%
28.3%
23.3%
18.5%
70.5%
39.9%
PWR
EME
CBI
MTZ
INSU
DY
MYRG
IESC
Average
4,034.9
1,361.1
1,151.8
830.8
550.0
339.8
256.3
167.7
20.45
20.79
12.09
12.23
19.69
8.63
13.00
11.46
93.7%
86.1%
136.1%
120.4%
112.6%
79.8%
160.0%
190.9%
122.4%
57.8%
57.7%
21.7%
77.7%
94.6%
34.0%
72.2%
51.3%
58.4%
VMI
MWA
AMN
NWPX
FSTR
Average
1,614.0
887.7
568.8
404.8
327.6
61.72
7.69
61.95
44.09
31.96
64.7%
126.2%
90.6%
135.1%
59.8%
95.3%
51.0%
60.5%
44.7%
67.6%
65.3%
57.8%
Construction Companies
% Change
From 52 - Week
Low Price
FLR
URS
KBR
GVA
PCR
ARE
LAYN
WG
STRL
Average
Aggregates / Cement
Producers
Current
Price
Construction
Equipment
Manufacturers
Company
Market Cap.
As of 1/8/09
Specialty Construction
Services
($ in millions)
Infrastructure
Product Mfg.
Source: Capital IQ
Infrastructure companies have recently moved back in favor with investors as a result of President-elect Obamas
stimulus plan that includes major investments in infrastructure.
11/4/08 Obama elected
President of the U.S.
140
130
120
11/21/08 Congress
postponed stimulus plan
until after Obamas
inauguration, leading to
an increase in the
expected amount
designated for
infrastructure.
12/8/08 - Obama
announced his
administrations
significant infrastructure
spending plan.
26.2%
17.0%
Indexed Prices
110
9.3%
5.1%
2.2%
100
-7.6%
90
80
70
60
50
10/8/08
10/17/08
10/28/08
Construction
Companies
11/7/08
Aggregates /
Cement Producers
Source: FactSet
11/17/08
11/28/08
Specialty
Construction Services
16
12/8/08
Construction
Equip. Mfg.
12/18/08
12/26/08
Infrastructure
Product Mfg.
1/8/09
S&P 500
Valuation Analysis
The valuation scorecard uses seven metrics* to identify the value drivers for public companies that serve the
infrastructure end market.
Median Scorecard Metrics
EBIT Margin
Construction
Companies
Aggregates /
Cement
Producers
Construction
Equipment
Mfg.
4.5%
14.0%
10.7%
Specialty
Infrastructure
Construction
Product
Services
Mfg.
4.4%
33.4%
1.2%
8.9%
31.6%
20.5%
Market Cap.
$1,256.1
$1,350.5
$3,025.8
$690.4
$568.8
Analyst Cov.
USLM
16.0%
8.8%
EBIT CAGR
15
23.7%
48.3%
51.7%
16.8%
29.0%
3
18.0%
MLM
TRN
HOLN
14.0%
($ in mil.)
Scorecard
Metrics
MTW
12.0%
DE
CAT
10.0%
NWPX
CNH
VMI
ASTE
TEX
MTZ
TXI
8.0%
AMN
GVA
FSTR
STRL
LAYN
6.0%
Debt / Cap.
ROIC
Infrastructure
Markets*
INSU
EME
4.0%
FLR
KBR
11.6%
5.9%
12.3%
5.9%
8.8%
2.0%
0.0%
ARE
PWR
URS
MYRG
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
1
CAT
80.0%
DE
CAT
$24,000
70.0%
$22,000
$16,000
HOLN
$14,000
$12,000
$10,000
$6,000
$4,000
RMIX
50.0%
EXP
HOLN
TXI
PWR
10
DY
URS
INSU
10.0%
MTW
WG
12
14
CBI
16
TEX
3
18
20
22
0.0%
0.0%
24
# of Analysts
Source: Capital IQ
VMI
GVA
NWPX
STRL
ARE
20.0%
MLM
URS
MWA
TEX
MTZ
USLM
CNH
GVA
TRN
CX
CX
VMC
KBR
TRN
1
$2,000
AMN PCR VMI INSU ARE EME
USLM IESC
DY
EXP
NWPX
$MYRG
STRL TXI RMIX
2
4
6
8
MLM
VMC
MWA
40.0%
30.0%
FLR
$8,000
CNH
60.0%
DE
$18,000
Debt / Cap.
$20,000
WG
PWR MYRG
EME
IESC
AMN
KBR
5.0%
MTW
FSTR
LAYN
10.0%
PCR
FLR
ASTE
15.0%
20.0%
4
25.0%
30.0%
ROIC
17
*EBIT Margin, EBIT CAGR, Market Cap., Analyst Coverage, Debt / Total Cap., ROIC,
and Exposure to the Infrastructure Market
Valuation Scorecard
Observations
Aggregates / Cement Producers are enjoying high multiples due to high margins (avg. EBIT margin of 14.0%), lower
oil/gas prices (used in bitumen and asphalt), and high exposure to highway and road projects.
Construction Equipment Manufacturers enjoy the largest market capitalizations, high margins (10.7%), highest
analyst coverage (avg. of 15 analysts), and highest ROIC (avg. 12.3%) versus the other subsectors primarily due to the
inclusion of CAT and DE. The subsector trades at a median EBIT multiple of 8.2x.
Construction Companies and Specialty Construction Services companies have received a minimal halo effect from
the expected increase in infrastructure spending due to the unknown size and timing of the program. Companies in
the subsector are very dependent upon their backlogs future work that has been secured.
The scorecard formula indicates that TEX, MTW, EME and CBI are somewhat undervalued as they trade at relatively
low EBIT multiples among the peer group but scored high in our ranking.
Scorecard vs. 2009 EBIT Multiple
Aggregates / Cement Producers
Construction Companies
Infrastructure Product
Manufacturers
32
35.0x
28
30.0x
24
25.0x
20
Score
16
13
12
12
11
12
11
10
10
11
12
10
10
10
11
10
8
7
15.0x
12
11
10
12
11
8
7
10.0x
6
5
4
5.0x
0.0x
FLR
STRL
GVA
WG
LAYN ARE
URS
KBR
PCR
VMC
MLM
CX
HOLN EXP
TXI
USLM TRN
RMIX
TEX
18
DE
CAT
PWR
EME
CBI
MTZ
DY
MWA
VMI
Note: Yellow line denotes the median EBIT multiple for the subgroup
EBIT Multiple
20.0x
Capital Considerations
Construction firms have moved in and out of favor over the past 12 months as investors have chased the
beneficiaries of growth trends in energy and infrastructure.
Turbulence in the capital markets as evidenced by sharp declines in most stock indexes have left the public equity
and debt markets relatively closed. Public companies have responded by filing shelf registrations to take
advantage when the market rebounds (examples include: FLR, KBR, INSU, WG, STRL, URS, VMC).
Private equity firms are still looking to deploy capital in attractive situations; however, firms that have traditionally
relied on leverage to purchase businesses are reviewing alternatives such as PIPEs and minority investments, as
well as purchasing senior debt.
M&A activity is down significantly in the basic materials and construction services industries, although a number
of noteworthy deals occurred, including:
Insight Equity acquiring Meadow Valley for $88.7 million
KBR acquired BE&K, Inc. for $550.0 million
The Brock Group of Companies acquired Atlantic Industrial for $250.0 million
20
Number of Deals
1,200
1,000
1,265
833
545
600
463
635
573
400
359
570
200
395
345
176
207
188
2001
2002
2003
403
345
323
323
2004
2005
2006
180
0
1999
2000
IPO
2007
2008
FO
U.S. issuers.
Source: Capital IQ
1,168
1,104
1998
1,235
552
800
$2,000
4,000
$1,800
3,500
$1,600
3,000
Deal Value ($ in bil.)
$1,400
2,500
$1,200
$1,000
2,000
$800
1,500
$600
1,000
$400
500
$200
$-
0
1998
1999
2000
2001
2002
2003
Deal Value
21
2004
2005
No. of Deals
2006
2007
2008
No. of Deals
$30,000
$25,000
$20,000
$5,000
$17,847
120
$19,304
$17,787
100
$10,000
80
$8,048
$7,615
60
40
$4,328
$2,114
$1,916
20
$1,435
$-
0
1998
2008
Infrastructure FO Activity
$4,500
$4,263
$3,000
16
$4,000
14
$3,500
$2,765
$2,500
$2,000
$1,500
12
$3,000
10
$2,516
$2,500
$2,000
140
$20,183
$15,000
160
$25,005
$2,158
$1,546
$1,500
8
$1,321
$1,314
$1,258
$979
$1,000
$656
$578
$1,000
$543
$595
$500
$500
$1999
2000
2001
2002
Value
2003
2004
2005
2006
2007
$119
$115
1999
2000
$300
$206
$-
$-
$-
2001
2002
2003
Value
# of Deals
22
1
-
1998
2008
Source: Capital IQ
Note: Activity includes U.S. pending and completed deals.
$242
$561
$-
1998
2004
2005
2006
2007
2008
# of Deals
Target
Orionidas, S.A.
Stainton Metal Company
MOR PPM Inc.
Meadors Construction Co. Inc.
Wabi Development Corp.
Wanzek Construction, Inc.
Mountaineer State Energy, Inc.
Gehl Co.
Tryck Nyman Hayes, Inc.
Eagle Materials Inc. (5% ownership)
Prince Contracting Co., Inc.
LopezGarcia Group
Fantuzzi Industries
Dillman Equipment, Inc.
Southern Aggregates LLC
Meadow Valley Corp.
Gremada Industries, Inc.
Travis Aggregages, Inc.
Snelson Companies, Inc.
Shaw T&D Company, Inc.
Barnhart, Inc.
TXI (SE Louisiana Sand & Gravel Assets)
Wittman Hydro Planning Associates
FNF Construction
Mid-Land Equipment Co.
Atlantic Industrial, Inc.
BE&K, Inc.
Pumpco, Inc.
Hydra Platforms Manufacturing, Inc.
VMC (Six Quarry Locations)
Mechanical Services of Central Florida, Inc.
Tutor-Saliba Corporation
Lovat, Inc.
Pavestone Company
Subaqueous Services
Xuzhou Xuwa Excavator Machinery Co., Ltd.
Riddleberger Brothers, Inc.
West Coast Engineering
Pipeline Systems Inc.
Valmont PennSummit
A.S.V. Inc.
City Concrete Company
Tierdael Construction Company
Marmon Holdings, Inc.
Source: Capital IQ
Target Description
Buyer/Investor
Construction aggregates
Manufactures steel lighting columns
Provides support services
Constructs water treatment facilities
Construction firm
Construction firm
Oil & gas pipeline construction
Construction & agricultural equipment
Engineering firm
Construction materials
General contractor
Engineering firm
Manufactures port equipment
Asphalt plant equipment
Construction aggregates
Construction firm
Equipment manufacturer
Construction aggregates
Pipeline construction
Power transmission & distribution
Construction site management solutions
Gravel and sand pits
Water resource consulting firm
Heavy construction firm
Manufactures construction equipment
Scaffolding services
Industrial engineering firm
Pipeline construction
Manufactures access platforms
Construction aggregates
Provides mechanical mobile services
General contractor
Manufactures tunnel boring machines
Concrete product manufacturer
Marine construction firm
Construction machinery
Mechanical contractor
Steel / aluminum pole manufacturer
Designs slurry transport systems
Designs & manufactures steel tubing
Rubber track machines
Construction aggregates
Municipal & highway contractor
Construction & transportation firm
23
CEMEX
Valmont Industries
EMCOR Group
Layne Christensen (Reynolds, Inc.)
KBR, Inc.
MasTec North America Inc.
New Concept Energy, Inc.
Manitou BF
URS Corp.
Ash Grove Cement Company
Soares Da Costa America, Inc.
URS Corp.
Terex Corp.
Astec Industries Inc.
VantaCore Partners LP
Insight Equity
Caterpillar Inc.
Texas Industries, Inc.
Oaktree Capital Management
Pike Electric, Inc.
Balfour Beatty plc
Lafarge North America, Inc.
Layne Christensen Inc.
J.H. Whitney & Co.
Titan Machinery, Inc.
The Brock Group of Companies
KBR, Inc.
MasTec North America Inc.
Terex Corp.
Martin Marietta Materials Inc.
EMCOR Group
Perini Corp.
Caterpillar Inc.
CRH plc
Orion Marine Group
Deere & Co.
Comfort Systems USA Inc.
Valmont Industries
Ausenco Limited
Valmont Industries
Terex Corp.
Memphis Ready Mix
Layne Christensen
Berkshire Hathaway Inc.
Transaction Val.
--3.3
--4.5
19.5
171.7
15.6
402.1
21.8
53.5
33.7
--323.2
21.3
50.0
88.7
62.0
----24.3
116.0
--2.5
--14.4
250.0
550.0
61.0
--192.0
--885.8
57.6
540.0
39.8
--43.0
37.5
38.7
115.2
490.3
7.2
6.9
4,500.0
Enterprise Value/
Rev.
EBITDA
----------0.6x
--1.1x
--2.1x
0.3x
--------0.2x
------0.2x
0.2x
------0.3x
--0.3x
0.9x
------0.8x
--1.5x
0.8x
--0.7x
1.3x
--1.2x
2.3x
0.3x
--0.6x
--------------13.4x
--8.5x
----------3.8x
--------5.1x
------------------------8.3x
3.7x
----------24.0x
-------
Target
Power Partners MasTec, LLC
Energy Maintenance Service, LLC
CEMEX (AZ & FL Operations)
Solmetex, Inc.
U.S. Concrete, Inc.
Living Earth Technology Company
Wilder Construction Company
Superior Highwall Miners, Inc.
Integrated Service Company LLC
Road & Highway Builders, LLC
Trigon EPC, LLC
Oglebay Norton Co.
Two Construction Materials Cos.
Flatiron Construction Corp.
U.S. Silica Company, Inc.
The Feldspar Corporation
Cb&i Lummus Global, Inc.
Ambuja Cements Ltd.
Schiavone Construction Co.
Bobcat Company
rePipe, Inc.
Continental Pipe Manufacturing Co.
Peterson Pacific Corp.
Washington Group International Inc.
Jurong Cement Ltd.
AfriSam South Africa
Edwards and Kelcey, Inc.
InfraSource Services Inc.
St. Lawrence Cement Group Inc.
TIMEC Company, Inc.
Florida Rock Industries, Inc.
The Karson Group
Centex Construction Group
Fast Fabricators Inc.
Handyman Concrete Inc.
Source: Capital IQ
Target Description
Buyer/Investor
Wind energy
Wind energy
Construction aggregates
Offers mercury removal technology
Construction aggregates
Soil amendments
Construction firm
Mining system manufacturer
Construction firm
Heavy civil construction
Construction & engineering firm
Industrial minerals
Construction aggregates
Transportation & civil construction
Construction aggregates
Construction aggregates
Engineering & construction management
Construction aggregates
Construction firm
Manufactures construction equipment
Underground pipeline construction
Designs & manufactures steel pipe
Heavy construction
Construction & engineering firm
Construction aggregates
Construction materials
Construction & engineering firm
Specialty contractor
Construction aggregates
Construction firm
Construction materials
Construction materials
Commercial construction firm
Iron pipe fabricator
Construction aggregates
24
MasTec Inc.
Broadwind Energy, Inc.
CRH plc
Layne Christensen
Oldcastle Materials, Inc.
Hunt Special Situations Group
Granite Construction Inc.
Terex Corp.
Willbros USA, Inc.
Sterling Construction Co. Inc.
CH2M Hill Companies Ltd.
Carmeuse Lime & Stone, Inc.
Votorantim Cimentos North America, Inc.
Hochtief AG
Harbinger Capital Partners
Imerys SA
Chicago Bridge & Iron
Holcim Ltd.
Dragados Inversiones USA
Doosan Infracore Co. Ltd.
Inland Waters Pollution Control, Inc.
Northwest Pipe Co.
Astec Industries Inc.
URS Corp.
Holcim Ltd.
Holcim Ltd.
Jacobs Engineering Group, Inc.
Quanta Services Inc.
Holcim Ltd.
Transfield Services Ltd.
Vulcan Materials Company
Aecon Group, Inc.
Balfour Beatty plc
Mueller Water Products
Ennstone Inc.
Transaction Val.
$
13.2
36.1
250.0
14.5
16.5
37.0
28.0
146.0
221.9
54.9
34.6
654.7
225.0
240.0
300.0
41.0
850.0
295.8
150.0
4,900.0
80.5
--31.1
3,168.4
11.3
967.6
56.6
1,337.8
649.6
100.0
4,469.9
42.0
422.0
24.5
9.0
Enterprise Value/
Rev.
EBITDA
--3.5x
----0.5x
0.7x
0.5x
--0.7x
0.8x
--1.7x
--0.4x
--1.4x
0.9x
4.9x
--1.9x
1.6x
----0.8x
1.3x
----1.3x
1.6x
0.4x
3.2x
---------
----------------7.2x
2.6x
--11.7x
----------12.4x
----------15.3x
50.4x
----17.5x
11.3x
--11.2x
---------
Issuer
Issuer Description
12/17/08
9/15/08
7/17/08
5/28/08
Brand Energy
MDU Resources Group Inc.
5/8/08
1/14/08
Amount
690.0
135.0
FO
FO
Scaffolding services
Manufactures construction aggregates
300.0
-
IPO
FO
Piping manufacturer
Energy construction and maintenance services
153.3
280.0
FO
FO
11/21/07
11/14/07
32.0
157.9
FO
FO
10/22/07
9/20/07
Piping manufacturer
Provides drilling and construction services
140.4
147.2
FO
FO
8/28/07
8/27/07
201.3
1,247.0
IPO
IPO
6/5/07
5/31/07
213.7
19.2
IPO
FO
4/17/07
4/13/07
400.0
2.5
IPO
FO
4/11/07
3/8/07
0.2
703.0
FO
IPO
3/2/07
2/20/07
KBR, Inc.
Vectren Corp.
3,039.4
130.3
FO
FO
2/9/07
2/6/07
11.2
362.4
FO
FO
1/17/07
1/16/07
150.0
70.7
FO
FO
Ann. Date
Issuer
Issuer Description
12/2/08
7/16/08
Caterpillar Inc.
Oldcastle, Inc.
6/17/08
5/12/08
4/16/08
12/3/07
11/6/07
4/13/07
Terex Corp.
MasTec Inc.
Source: Capital IQ
Type
Amount
1,248.4
649.8
Fixed-Income
Fixed-Income
Construction aggregates
Industrial services & engineered products
Construction aggregates
Construction aggregates
649.1
449.5
299.8
1,223.6
Fixed-Income
Fixed-Income
Fixed-Income
Fixed-Income
800.0
150.0
Fixed-Income
Fixed-Income
25
Type
Berkshire Partners
Blue Point Capital Partners
Brazos Private Equity Partners
Chicago Growth Partners
Cleaview Capital Partners
EOS Partners
First Reserve Corporation
Genstar Capital
Graham Partners
Harvest Partners
H.I.G. Capital
Insight Equity
J.H. Whitney & Co.
Source: Capital IQ
Holding
Holding Description
26
The Takeaway
Our Conclusion
Similar to the overall market, capital availability for construction related companies has contracted significantly
over the past six months. However, construction related companies that serve the infrastructure market are
expected to benefit significantly from the anticipated stimulus plan.
Recently, share prices of construction related companies that serve the infrastructure market increased 66%.
President-elect Obamas stimulus plan will include a large infrastructure component; however, the longer term
impact on share prices will be determined by the ultimate size of the program and the speed in which it can be put
in place.
Companies are being required to maintain higher cash balances in their businesses as lenders have tightened
leverage ratios and enforce more stringent restrictive covenants. Furthermore, the ability to refinance existing debt
has become tenuous for all but the most credit worthy borrowers.
The maintenance of large cash balances and the structural subordination of additional debt are often
necessary to secure more leverage, assuming that it is available.
Bonding requirements add an additional layer of complexity to financings.
Private equity firms with sizable funds to invest have shown increased interest in the sector. On December 26, 2008
Meadow Valley Corp.s shareholders approved the purchase of the company by Insight Equity. In May 2008 J.H.
Whitney & Co. acquired FNF Construction, Inc., a heavy-highway infrastructure construction company.
Private investments in existing or new infrastructure assets via public private partnerships (PPPs) are likely to
increase as public funding for infrastructure has slowed dramatically over the past decade. The recent PPP between
Citi Infrastructure Investors and Chicagos Midway Airport netted $2.5 billion, an amount that was considerably
higher than expectations.
Capital availability is expected to improve gradually in 2009 as a result of the $700 billion financial bailout plan
passed in late 2008. The easing of the credit markets coupled with the large infrastructure component of the new
administrations stimulus plan is expected to improve infrastructure related construction activity in 2009.
28
Appendix
Company Financials
Company Description
Toronto, ON
Irving, TX
Watsonville, CA
Houston, TX
Mission Woods, KS
Employees: 4,300
Ownership: Public (Nasdaq: LAYN)
Source: Capital IQ
30
Company Financials
Company Description
Framingham, MA
Houston, TX
San Francisco, CA
Source: Capital IQ
31
Company Financials
Company Description
CEMEX produces, distributes, markets, and sells cement, ready-mix
concrete, aggregates, and other construction materials. The Company
sells its products primarily to distributors in the construction industry.
The Company has operations in over 50 countries.
N.L. Mexico
Dallas, TX
Jona, Switzerland
Raleigh, NC
Dallas, TX
Employees: 2,500
Ownership: Public (NYSE: TXI)
Source: Capital IQ
32
Company Financials
Company Description
Dallas, TX
Houston, TX
United States Lime & Minerals manufactures and sells lime and
limestone products. It extracts limestone from open-pit and
underground quarries, and processes it for sale as pulverized limestone,
quicklime, hydrated lime, and lime slurry. The Company sells its lime
and limestone products to highway, street and parking lot contractors,
steel producers, municipal sanitation and water treatment facilities, etc.
Dallas, TX
Birmingham, AL
Source: Capital IQ
33
Company Financials
Company Description
Chattanooga, TN
Peoria, IL
Amsterdam, Netherlands
Moline, IL
Manitowoc, WI
34
Company Financials
Company Description
Westport, CT
Source: Capital IQ
35
Company Financials
Company Description
The Woodlands, TX
Norwalk, CT
Chesterfield, MO
Houston, TX
36
Company Financials
Company Description
Coral Gables, FL
Rolling Meadows, IL
Houston, TX
Source: Capital IQ
37
Company Financials
Company Description
Ameron International Corporation manufactures and sells engineered
products and materials for the chemical, industrial, energy,
transportation, and infrastructure industries. It operates in three
segments: Fiberglass-Composite Pipe; Water Transmission; and
Infrastructure Products. The Company manufactures fiberglass pipe,
concrete pipe, fabricated steel products, and lighting and traffic poles.
Pasadena, CA
Pittsburgh, PA
Vancouver, WA
Atlanta, GA
Omaha, NE
38