Aecon, Canada's largest public construction and infrastructure development company, has signed a letter of intent to purchase oil sands mining contractor Cow Harbour Construction for $180 million.
The letter of intent provides for a $10 million deposit, another $50 million in cash when the deal closes and the balance of the purchase price to be paid within 90 days of closing.Aecon said it intends to finance the transaction primarily through traditional equipment loan financing from asset-based lenders that have already expressed strong interest in assisting with this transaction.
Cow Harbour, based in Fort McMurray, Alberta, was founded in 1987 and grew to become one of the top three mining, land reclamation and contracting services businesses in the oils sands sector, with over 800 employees and revenues of $230 million.
However, operating problems linked to rapid growth and a tightening of credit markets led the company to seek protection from creditors in April, under the Companies' Creditors Arrangement Act (CCAA).
The transaction is targeted to close on or about August 31, 2010, but Aecon said that completion is subject to a number of conditions, including approvals from a large number of interested parties, so it is by no means certain yet that the transaction will be completed.
Upon completion of the transaction, Cow Harbour's assets would become part of Aecon's Infrastructure division. Aecon said the acquisition of Cow Harbour's equipment and resources in Alberta, combined with those of Aecon subsidiary Alarie Construction in Ontario, would significantly enhance the Toronto company's ability to meet the mining needs of customers across Canada.
"The expansion of our capabilities in the oil sands industry has been a strategic priority for us," said John Beck, chairman and CEO of Aecon Group. "This acquisition will solidify our competitive profile in a market we believe is poised for significant growth. The fact that we've been able to acquire a truly competitive fleet in this manner only adds to the attraction of this investment for us."
Aecon said it intends to offer jobs to most of the employees of Cow Harbour once the transaction closes.
