North American Construction Group takes ownership interest in Nuna Logistics
— Photo courtesy North American Construction Group
North American Construction Group Ltd. (“NACG” or “the Company”) (TSX:NOA/NYSE:NOA) recently announced that it has entered into a definitive agreement to acquire a 49% ownership interest in Nuna Logistics Limited and related companies (collectively, “Nuna”), a civil construction and contract mining company based in Edmonton, Alberta, for $42.5 million in cash (the “Purchase Price”) from a group of private selling shareholders (the “Transaction”). The majority 51% ownership interest in Nuna is held by the Kitikmeot Corporation, a wholly owned business arm of the Kitikmeot Inuit Association.
“This Transaction represents a compelling opportunity for us to continue to execute on our strategy of customer and revenue diversification, while also reducing the overall capital intensity of our business and extending our reach into what we consider to be a very attractive market,” said Martin Ferron, Chairman and CEO of NACG. “Nuna’s revenue is entirely non-oil-sands related and they are recognized as a leading civil construction and mine services contractor in northern Canada, providing a clear strategic fit.”
The Transaction is aligned with NACG’s strategic goals, as Nuna expands end user coverage into other commodity areas (e.g. base metals, precious metals, and diamonds) and infrastructure-related projects that involve major earthworks. Nuna is an established incumbent contractor in Nunavut and the Northwest Territories, but has also successfully completed major projects in Ontario, Saskatchewan and British Columbia. NACG believes that this acquisition will provide mutual benefit to both NACG and Nuna through access to broader equipment fleets, experienced field personnel and expanded services such as NACG’s growing external maintenance offering. This access to shared resources is expected to provide opportunity for improved utilization and efficiency, especially in a tightening marketplace.
The Transaction is expected to provide NACG with approximately 20% of incremental and diversified revenue, based on the consensus of research analysts’ estimates for 2019. Nuna’s asset light business model will result in accretive EBITDA, free cash flow and earnings, even before meaningful synergies. NACG will play an active role in the leadership of Nuna and so anticipates the synergies to be fully realized well within two years from closing of the transaction, which is likely to occur early in the upcoming fourth quarter. The Purchase Price implies a transaction multiple of 1.0 x tangible book value and will be fully financed using NACG’s existing credit facility. The purchase price is subject to customary closing adjustments based on shareholders’ equity.
Advisors and Counsel
National Bank Financial Inc. is acting as financial advisor to NACG and Raymond James is acting in the same capacity for the vendors. Borden Ladner Gervais LLP is acting as legal counsel to NACG.
About Nuna
Nuna Logistics Limited (www.nunalogistics.com) has been in business for 25 years and is a civil construction and contract mining company based in Edmonton, Alberta, Canada. The Nuna Group of Companies comprises almost 40 entities, ventures, and partnerships, which provide a wide range of construction related services with over 500 pieces of equipment and a peak workforce of around 600 people.
About NACG
North American Construction Group Ltd. (www.nacg.ca) is the premier provider of heavy construction and mining services in Canada. For more than 60 years, NACG has provided services to large oil, natural gas and resource companies. The Company maintains one of the largest equipment fleets in the region.
