Aecon Group is selling its Contract Mining business to North American Construction Group Inc. (NACG).
On Oct. 3, Aecon Group announced it has entered into a definitive asset purchase agreement with NACG to sell the business and all of its related assets for $199.1 million in cash.
Aecon’s Contract Mining business provides overburden removal and environmental reclamation services through a dedicated fleet of earth-moving equipment, primarily in the oil sands in Fort McMurray, Alberta.
“Aecon is executing on a record level of backlog and pursuing an unprecedented number of opportunities across our infrastructure and industrial segments,” said Jean-Louis Servranckx, president and CEO of Aecon. “The capital-intensive Contract Mining business is outside Aecon’s core construction activities and focus. This transaction is consistent with Aecon’s drive to maintain and strengthen our balance sheet flexibility, which is key to the strong growth trajectory we are seeing in our core business.”
Upon signing the asset purchase agreement, NACG paid Aecon a $10 million deposit, which will be applied to the purchase price if the transaction closes as planned.
The balance of the price will be paid in four instalments, with the first instalment of $153.6 million due at closing and the following three instalments of $11.8 million paid six, 12 and 18 months following closing, which are secured by a charge over certain assets that are the subject of the transaction.
If the sale transaction is not completed due to a default by NACG of its obligations under the agreement, the deposit will be retained by Aecon.
Aecon will continue to operate its Contract Mining business, without disruption to its clients or employees, in the normal course pending closing of the sale transaction.
The transaction is expected to provide NACG with over $220 million of additional annual revenue capability. As well, the deal involves the purchase of Aecon’s fleet of heavy earth-moving assets, together with lighter construction assets, support equipment and maintenance facilities.
“During the recent severe cyclical downturn in the oil industry we worked extremely hard to be part of the solution to help lower the operating costs of our customers on oil-sands mines,” said Martin Ferron, Chairman and CEO of NACG.
“We achieved this by maximizing the uptime and operability of our equipment fleet through innovative maintenance practices and work methodologies. We are therefore now pleased to better serve our customers by applying the same innovations to an expanded fleet, at a time when they are striving to maximize production and efficiency on each mine.”
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