COMPANY NEWS Kenny Construction bought out by Granite
Jan 2013
TunnelTalk reporting
- Leading USA tunnelling company Kenny Construction of Chicago, Illinois, is now a wholly-owned subsidiary of Granite Construction of California. NYSE publicly traded firm Granite signed a definitive agreement to acquire the family-owned and operated Kenny company in a total $130 million transaction that was closed in escrow and became effective on December 31, 2012.
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- Founded in 1927 and passing through four generations of family ownership, Kenny transformed from a small construction company to a leading electrical power contractor and an industry-leading rehabilitation and tunneling contractor using advanced trenchless and underground construction technologies and processes.
- Today Kenny has some 425 employees and revenues projected at $270 million for 2012 with approximately 50% of these revenues associated with the power sector, 20% associated with tunneling-related work, and 30% coming from water/underground and other heavy/civil related work. As of December 31, 2012, Kenny's backlog is projected to be about $390 million.
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- Current and recent tunneling contracts for Kenny include the first tunnel contract for the Eglinton-Scarborough Crosstown LRT link in Toronto, Canada, in joint venture with Obayashi, Kenaidan and Technicore; the OARS augmentation and relief sewer project in Columbus, Ohio, in joint venture with Obayashi; the successful East Tunnel contract in joint venture with Shea and Traylor for the Brightwater conveyance tunnel project in Seattle; and the Arrowhead water delivery tunnels in California in joint venture with Shea. Kenny was also among the bidders on many other major tunneling contracts in the US that went to lower bids.
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Breakthrough at Brightwater for Kenny/Shea/Traylor JV
- Granite is one of the nation's leading infrastructure contractors and is a member of the S&P 400 Midcap Index, the FTSE KLD 400 Social Index and the Russell 2000 Index. With annual revenues of about $2 billion, it is one of the largest diversified heavy civil contractors and construction materials producers in the US and has large construction projects currently on the East and West coasts. These include the Queens tunnels for the East Side Access project in New York City in joint venture with Traylor and Frontier Kemper and prequalification in California for contracts on the first segment of the State's mega high-speed railway project. The acquisition of Kenny fills the Midwest area for Granite and expands its presence in the power, tunneling, water services and underground construction markets.
- "This acquisition is an important milestone for Granite as we continue to execute on our strategic plan to diversify and grow our business," said James H. Roberts, Granite's President and Chief Executive Officer. "The addition of Kenny's expertise in the power, tunneling and underground markets will significantly expand our presence in these key areas as well as enable us to leverage our capabilities and geographic footprint to take advantage of opportunities across the country."
- Kenny's reputation advanced through its early years of experience from building Chicago's first downtown subway, to its recovery of the serious breach of the under-river sections and flooding of the network of abandoned freight tunnels under the city in 1992, and its extensive contribution to the TARP stormwater retention project in Chicago in the 1980s and 1990s that deployed several Robbins hard rock TBMs of up to 30ft diameter. Many of the company's recent tunneling projects have been completed under the leadership of Ted Budd, Vice President of the company's Tunnel Group. Budd, a long-time employee of Kenny, suffered a health scare late last year but is said to be recovering. Friends and colleagues in the industry wish him well.
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Kenny is part of Toronto Crosstown tunnelling JV
- A press release by Granite explains that its $130 million cash purchase price at closing is in exchange for 100% of the outstanding shares of Kenny and subject to adjustment for any outstanding Kenny indebtedness. One-time costs related to the acquisition are estimated to be approximately $5 million and will be recorded by Granite in the fourth quarter 2012. Granite will receive a tax 'step up' in the assets of Kenny and its subsidiaries that is expected to provide future tax benefits to Granite. These benefits imply an effective purchase price of 5.0x Kenny's projected 2012 EBITDA.
- Granite intends to finance the transaction through a combination of cash and available borrowings under its existing revolving credit facility. Including integration costs and the impact of intangible amortization, the transaction is expected to be break-even to Granite's 2013 earnings per share. Excluding intangible asset amortization, the transaction would be immediately accretive. These projections are based on preliminary estimates of the allocation of purchase price intangible assets.
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First tunnel award for Toronto Crosstown LRT - TunnelTalk, September 2012
Columbus mobilizes the OARS project - TunnelTalk, January 2011
Brightwater under pressure as first tunnel contract holes through - TunnelTalk, January 2009
Clawing success from the extreme at Arrowhead - TunnelTalk, December 2007
Slurry TBMs ready to tackle New York ground - TunnelTalk, March 2011
California HSR identifies qualified contractors - TunnelTalk, February 2012
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