Shares of infrastructure construction company
) gained 3% since the announcement of its acquisition of Pacer
Construction Holdings Corporation, a leading contractor in Western
Canada, and its affiliated operating companies. The acquisition is
worth $126 million in cash plus a 5-year contingent earn-out.
Headquartered in Calgary, Alberta, Canada, Pacer mainly focuses on
infrastructure construction supporting the oil and gas
production/processing, mining and transportation industries.
Moreover, it also has a strong presence in, among other locations,
Fort McMurray, Fort McKay and Edmonton, Alberta and Regina,
Pacer has a workforce of nearly 1,600 people and has more than
2,000 pieces of owned construction equipment. At closing of the
deal, Pacer had approximately $54 million in tangible net worth
(including $87 million of debt).
MasTec added that on Jun 25, 2014, the company amended its senior
secured credit facility. MasTec increased the aggregate borrowing
commitments from $750 million to $1 billion, adding the capability
to borrow in Mexican pesos (in addition to Canadian dollars) and
raising the amount that can be borrowed in these alternative
currencies from $100 million to $200 million. The amended credit
facility also retains an accordion feature that will allow a $250
million increase in the amount available under the facility to
Given Pacer's strong presence in Canada's dynamic energy and mining
sectors, it will help in MasTec's plan to lead the development of
energy infrastructure in Canada. The expansion of MasTec's senior
credit facility, backed by the company's strong cash flow, will
provide it with financial flexibility to engage in strategic growth
opportunities across North America.
MasTec shares took a beating after the company lowered its outlook
for the second quarter of 2014 on Jun 2. Notably, MasTec reduced
its second quarter earnings per share (EPS) guidance to 40 cents
from 53 cents and cut the revenue guidance to around $1.1 billion
from the previous range of $1.15-$1.2 billion.
The weak outlook was blamed on unexpected delays in wireless
project spending and weaker-than-expected performance at the oil
and gas segment. MasTec expects wireless project revenues to
decline in the second quarter as various planned projects were
deferred and or reduced in scope.
These unexpected revenue declines will negatively affect segment
results reflecting the effect of reduced absorption of non-variable
indirect and overhead costs. In addition, the company foresees
changes to levels of second half 2014 wireless project spending,
although the extent of potential changes cannot be estimated yet.
Coral Gables, FL-based MasTec is a leading infrastructure
construction company that operates primarily in North America and
caters to a range of industries. Its services include engineering,
building, installation, maintenance and upgrade of energy, utility
and communications infrastructure as well as industrial
At present, MasTec has a Zacks Rank #3 (Hold). Some better-ranked
stocks in the building and heavy construction industry include
Gibraltar Industries, Inc.
Tutor Perini Corp.
Primoris Services Corporation
). While Gibraltar Industries and Tutor Perini hold a Zacks Rank #1
(Strong Buy), Primoris carries a Zacks Rank #2 (Buy).
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