Quanta Services has acquired Stronghold companies, which are specialized solutions providers to the downstream and midstream energy markets, for a sum of $450m.
The cash-cum-stock transaction includes the acquisition of Stronghold and Stronghold Specialty.
According to Quanta Services, Stronghold has a strong footprint in the important Gulf Coast refinery and petrochemical market. It is headquartered in Texas’ La Porte and serves almost all the parts of the US.
For Quanta, the industrial services market which opens up to it through Stronghold acquisition is a natural service line expansion enabling it to cover the needs of energy customers.
Headquartered in Texas, Quanta is an integrated infrastructure solutions provider for the electric power and oil and gas industries.
Quanta Services president and CEO Duke Austin called Stronghold to be a strategic acquisition that will enable the company to capture a greater part of the energy industry operating and capital spend.
Austin added: "With positive industry dynamics, visible cross-selling opportunities and Quanta's support, we believe there is a multiyear opportunity for Stronghold's operations to achieve double digit growth.
“Stronghold's recurring revenues, accretive operating income margin profile and strong free cash flow generation align well with our strategic imperatives for long-term profitable growth.”
The operations of Stronghold will be marked in the oil and gas infrastructure services segment of Quanta.
Stronghold’s full year revenue in 2016 was around $500m and it has a workforce of around 2,800 employees.
As per the terms of the deal, Quanta Services had agreed to pay $450m upfront with $360m in the form of cash and the remaining $90m in the form of issuance of its shares to Stronghold’s stakeholders. Further, Stronghold could get a maximum of up to $100m provided the cumulative three-year EBITDA targets are achieved.
The existing management team of Stronghold has been retained while Joe Durham will continue as its CEO with the company becoming a platform operating unit of Quanta.
Durham said: "Both companies are committed to safety, our employees and our customers, which provide the foundation for success.
“Joining Quanta will provide significant resources to Stronghold as we look to build on our history of profitable growth and meet the growing needs of our customers in the years ahead."
Image: The cash-cum-stock transaction includes the acquisition of Stronghold and Stronghold Specialty. Photo: courtesy of stockimages/Freedigitalphotos.net.