US-based Granite Construction is retaining the former Layne Christensen mineral and water drilling businesses for now after failing to attract suitable prices for them.
The New York Stock Exchange-listed company sold its trenchless and pipe rehabilitation services (Inliner) business in March this year for about US$160 million and said at the time it expected to offload the Layne businesses it outlaid more than $500 million for in mid-2018 by the end of 2022. The 2018 Layne acquisition, including the assumption of debt, was “the largest acquisition in Granite’s history”.
“Although we saw significant interest in the Water Resources and Mineral Services businesses, current market conditions undermined our efforts to secure appropriate value for the businesses,” Granite CEO Kyle Larkin said this week.
“Both businesses have performed very well this year, supported by strong underlying market demand which remains resilient.
“The ongoing drought concerns across much of the country, coupled with the strong demand for mineral resources, makes us optimistic about the outlook for these businesses.
“Our teams’ ability to identify and develop new water sources and deliver potable water to communities complements our civil construction business.
“We believe these businesses will drive greater shareholder value and be accretive to EBITDA margin.”
The water and mineral drilling businesses previously classified as discontinued operations generated $188.5m of revenue in the first half of this year (versus $233m in H1 2021) and net income of $25.6m ($26.7m).
Century-old Granite is a diversified construction contractor and construction material supplier in the US. Its continuing operations contributed a net loss of $21m in H1 2022 on $1.3 billion of revenue ($1.4b).
“The planned divestitures of the businesses in our former Water and Mineral Services operating group reflect our new strategy to focus on our core civil construction and materials businesses by using sale proceeds to invest in these two businesses,” Granite said when it announced its first-half results.
Larkin has previously declined to publicly state what Granite expected to get for the for-sale arms.