Primoris Services Corporation (NASDAQ Global Select: PRIM) (“Primoris” or the “Company”) announced today that it has entered into a definitive merger agreement to acquire PLH Group, Inc. (“PLH Group” or “PLH”) in an all-cash transaction valued at $470 million.
Primoris, one of the top specialty contractors in the U.S., provides critical infrastructure services to the utility, renewables, and other related energy markets. The Company’s strategic focus on utility markets includes Power Delivery, Communications, and Gas Utilities. PLH Group is a utility-focused specialty construction company with a concentration in key fast-growing regions of the U.S. Both companies are headquartered in the Dallas-Fort Worth metroplex.
Strategic Advantages and Benefits
- Nearly doubles Power Delivery business and increases the Company’s Utilities segment to over 50 percent of pro forma revenue
- Solidifies Power Delivery presence in the five fastest-growing states to create more turnkey opportunities
- Accelerates the Company’s ongoing portfolio transition towards higher-growth, higher-margin markets, and recurring Master Service Agreement (“MSA”) revenue
Financial Advantages and Benefits
- Double-digit earnings per share accretion within 12 months with material cost and revenue synergies
- Primoris expects annual cost savings of at least $10 million from cost initiatives within 24 months after the close of the transaction
- Pro forma for the transaction Primoris net leverage of approximately 3.3x net debt to adjusted EBITDA for the last 12 months with targeted de-levering to 2.0x by 2024
“This acquisition aligns solidly with our strategic focus on higher-growth, higher-margin business segments,” said Tom McCormick, President and Chief Executive Officer of Primoris. “It expands our footprint for Power Delivery services at a time when improvement and expansion of our domestic electric grid are driving massive capital investment in this market.”
McCormick also pointed to the strengths of PLH in emerging growth utility markets including data centers and renewable-power-generation-to-grid connections: “We are the best owner for this business, and its scope complements ours both in end markets and geographic coverage, advancing us along our strategic path. We look forward to welcoming the PLH team to the Primoris family of companies.”
Peter Sandor, Chief Executive Officer of PLH Group, said, “We’re excited about the opportunities Primoris provides for both our customers and employees. Primoris’ wide range of services allows us to offer new capabilities to our existing customers while we continue to advance our core values of safety, integrity, professionalism, and teamwork. Further, Primoris’ size and expanded footprint will give the PLH teams access to greater career mobility and more diverse job opportunities in the future.”
For the 12 months ended May 31, 2022, PLH generated total revenue of $733 million and total adjusted earnings before income tax, depreciation, and amortization (“Adjusted EBITDA”) of $54 million. Approximately 80 percent of PLH revenue is associated with Power Delivery and Gas Utility end markets for the 12 months ended December 31, 2021.
With a high proportion of PLH revenue based on master service agreements (“MSAs”) and unit price contracts, the transaction also maintains Primoris’ strategic emphasis on limiting contract risk. On a pro forma basis, MSA contracts will increase from 46 percent of total revenue to 48 percent of total revenue.
Transaction Approvals and Closing Conditions
The transaction has been unanimously approved by the Boards of Directors of both Primoris and PLH Group and is expected to close in the third quarter of 2022. The transaction is dependent on the receipt of regulatory approvals and other customary closing conditions.
Financing
Primoris will acquire PLH Group for a purchase price of $470 million, funded through borrowings under our existing credit agreement. Certain members of our existing lender group have committed to providing $425 million of incremental term loans. Pro forma for the transaction, Primoris’ net leverage will be approximately 3.3x net debt to adjusted EBITDA, based on estimated Primoris net debt as of June 30, 2022, and Primoris LTM adjusted EBITDA as of March 31, 2022, combined with PLH LTM adjusted EBITDA as of May 31, 2022. Following the close of the transaction, Primoris targets net leverage of 2.0x by 2024.
Advisors
UBS Investment Bank served as the exclusive financial advisor to Primoris. Gibson, Dunn & Crutcher LLP served as the Company’s legal counsel. Stifel, Nicolaus & Company served as the exclusive financial advisor to PLH Group. K&L Gates LLP served as PLH Group’s legal counsel.
Conference Call
Tom McCormick, President and Chief Executive Officer, and Ken Dodgen, Executive Vice President, and Chief Financial Officer, will host a conference call Monday, June 27, 2022, at 9:00 am Central Time / 10:00 am Eastern Time to discuss the transaction.
