GE Stock – HC2 Holdings (HCHC) Unit Buys Banker Steel, Enters Credit Agreement
HC2 Holdings, Inc. HCHC announced that it acquired Lynchburg, VA-based Banker Steel Holdco LLC through its infrastructure arm, DBM Global. The other party to the buyout was Atlas Holdings LLC, which included Banker Steel Holdco in its portfolio.
Notably, the transaction value was $145 million. The deal was announced by HC2 Holdings on Mar 15, 2021.
Also, DBM Global entered a credit agreement, providing it with $110 million worth of revolving credit facility and $110 million of term loan.
Based in Phoenix, AZ, DBM Global is a specialist in proving integrated steel-construction services as well as asset management solutions. It has business in various markets, including healthcare, industrial, transportation, commercial and others.
Banker Steel engages in providing fabricated structural steel as well as erection services in the industrial and commercial construction markets of the southeast and east coast regions. It has six operating companies and employees 1,500 people.
It is worth noting here that the acquisition price of $145 million was settled by DBM Global through multiple means — including $25 million in cash (received as an intercompany settlement from HC2 Holdings), $64.1 million from the new revolving credit/term loan facility, $6.3 million worth of Banker Steel’s assumed debt, and $49.6 million of seller’s note.
As part of the purchase, Banker Steel’s six operating companies — including Innovative Detailing and Engineering Solutions; Banker Steel Co., LLC; Lynchburg Freight and Specialty LLC; NYC Constructors, LLC; Derr & Isbell Construction LLC; and Memco LLC —are now part of DBM Global. At the end of April, Banker Steel’s backlog was $800 million.
With added operating companies and employee strength, Banker Steel’s acquisition will enhance DBM Global’s geographical footprints. Also, leveraging benefits from the growth opportunities within the U.S. infrastructure market will be a lot easier. Banker Steel’s backlog of $800 million at the end of April is an added advantage. Overall, the buyout is anticipated to boost DBM Global’s revenues and earnings before interest, tax, depreciation and amortization.
Credit Agreement Detail
Through the new credit agreement, DBM Global has gained senior secured debt of $220 million. A part of it, $110 million of term loan carries an interest rate of 3.25% and is expected to mature on May 31, 2026. The second part, $110 million of revolving credit facility attracts interest rate that is equivalent to prime minus 1.10%. Expiry is expected on May 31, 2024.
DBM Global intends on using the proceeds of the credit agreement to finance its Banker Steel buyout (a part of it), pay for credit agreement (existing) and loan, and fund general corporate purposes.
The credit arrangement will provide liquidity, operational flexibility and help in lowering the cost of capital for DBM Global.
price Performance and Peers
HC2 Holdings’ efforts to boost growth opportunities, inorganic activities, reduce corporate expenses and strengthen the balance sheet are likely to aid the company, going forward. The pandemic-related headwinds are still concerning.
In the past three months, the company’s shares have gained 8.4% compared with the industry’s growth of 11.7%.
Image Source: Zacks Investment Research
Some other companies from the same industry engaging in buyout activities in the past few months are General Electric Company GE, Danaher Corporation DHR and Raven Industries, Inc. RAVN.
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Raven Industries, Inc. (RAVN): Free Stock Analysis Report
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HC2 Holdings, Inc. (HCHC): Free Stock Analysis Report
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