MasTec Inc. (MTZ) announced Monday that it has entered into a definitive agreement to acquire Infrastructure & Energy Alternatives Inc. or IEA (IEA) in a cash-and-stock transaction valued at $14.00 per IEA share. Based on estimated IEA net debt levels at closing, the total transaction consideration will be around $1.1 billion.
MasTec further updated its fiscal 2022 outlook, and IEA reaffirmed view.
In pre-market activity, MasTec shares were losing around 13 percent to trade at $63.41, while IEA shares were gaining around 27 percent to trade at $13.19.
Under the deal terms, IEA stockholders will receive $10.50 per share in cash and 0.0483 of a MasTec share, with a value of $3.50 per share, based on MasTec’s closing share price on July 22. It represents a 34% premium to IEA’s closing stock price on July 22.
MasTec expects to issue approximately 2.8 million MasTec shares in the transaction.
The deal has been unanimously approved by the Boards of Directors of both companies. The transaction is expected to close in late fourth quarter of 2022, subject to customary closing conditions, including IEA stockholders and Hart-Scott-Rodino approvals.
The deal is expected to be accretive to MasTec’s 2023 adjusted earnings per share before synergy benefits.
IEA, a services provider in renewable energy and infrastructure solutions, has completed more than 260 utility-scale wind and solar projects across North America. It has almost 6,000 team members.
MasTec said it has entered into agreements with various IEA stockholders, which collectively own approximately 35% of IEA’s outstanding stock, to vote their shares of IEA common stock in favor of the transaction.
Further, IEA reaffirmed its expectation that full year 2022 revenue will range between $2.3 billion to $2.5 billion, with net income ranging between $45 to $51 million, adjusted EBITDA ranging between $140 to $150 million.
For 2023, MasTec expects that IEA will generate revenue between $2.6 to $2.7 billion, with adjusted EBITDA ranging between $160 to $170 million, exclusive of any post transaction synergies.
Further, MasTec updated its annual guidance for 2022, primarily due to expected higher levels of costs during the second half of the year. The guidance excludes any effects from the IEA acquisition.
The Company is not adjusting its guidance expectation for the second quarter.
For the year, the company continues to expect that revenue will approximate $9.2 billion, with net income and earnings per share expected to approximate $95 million and $1.24, respectively. Full year 2022 adjusted EBITDA is expected to approximate $750 million and adjusted earnings per share are expected to approximate $3.09.
Second half 2022 revenue is expected to approximate $5 billion, with net income expected to approximate $114 million and adjusted EBITDA expected to approximate $471 million or 9.4% of revenue.
Jose Mas, MasTec’s Chief Executive Officer said, “While our expected second half 2022 performance represents a 280-basis point improvement in adjusted EBITDA margin rate versus first half 2022 results, our current expectation reflects higher expected project costs, inefficiencies and delays including the impact of higher fuel, labor and material costs from sustained levels of inflation. We believe that these impacts will be largely mitigated in 2023 as new projects and contractual cost escalators take effect. We continue to expect MasTec legacy operations in 2023 will generate strong revenue and adjusted EBITDA growth and look forward to the expected incremental contribution in 2023 of the IEA acquisition.”
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