October 25, 2023
Aecon Group Inc. announced that funds managed by the Power Opportunities strategy of Oaktree Capital Management, L.P. (Oaktree) agreed to make a strategic investment in an Aecon subsidiary, Aecon Utilities Group Inc. (Aecon Utilities), creating an enhanced growth vehicle focused on providing utility infrastructure services across North America. On closing, Oaktree will acquire a 27.5% ownership interest in Aecon Utilities by way of a net $150 million convertible preferred equity investment. The Investment is expected to provide immediate benefits to both Aecon and Aecon Utilities:
- Creates a Strategic Platform – Aecon Utilities is positioned to address industry growth opportunities across utility end-markets in Canada and the U.S., many of which are tied to ongoing energy transition and decarbonization. As a standalone legal entity, Aecon Utilities will have enhanced optionality regarding future capital raising.
- Establishes a Value-Add Partnership – Oaktree is a recognized value-added partner with an over 25-year track record in utilities infrastructure investing. Aecon Utilities will seek to leverage Oaktree’s expertise and network of relevant investments and relationships to enable continued growth in its platform in North America.
- Further Highlights the Value of Aecon’s Portfolio – The conversion value of the Investment implies a $750 million enterprise value for Aecon Utilities, representing a trailing twelve month (“TTM”) Adjusted EBITDA(1),(2) multiple of 9.3x. On closing Aecon will own 72.5% of Aecon Utilities.
- Provides Financial Flexibility to Accelerate Acquisition Strategy – Aecon Utilities will have a standalone committed revolving $400 million credit facility and supportive capital partners in Oaktree and Aecon to enable its growth aspirations. Aecon Utilities’ balance sheet will allow it to complement its track-record of organic growth with potential strategic acquisitions in Canada and the U.S.
- Generates Significant Proceeds to Aecon Group – Strengthens Aecon’s consolidated balance sheet with Aecon receiving proceeds of $150 million from the Investment. This will provide Aecon the financial flexibility to fund strategic growth initiatives. In addition to Aecon Utilities’ new credit facility of $400 million, Aecon will have a separate committed revolving credit facility of $450 million to replace its prior $600 million facility following the closing of the Investment.
Aecon Utilities is a leading provider of utility infrastructure solutions in Canada operating in four end markets: electrical transmission and distribution, renewables and in-home services, telecommunications, and pipeline distribution. A significant portion of Aecon Utilities’ revenues are generated from recurring revenue programs for public and leading private utility-sector clients. Aecon Utilities has demonstrated a strong revenue growth profile with an approximate 19% compound annual growth rate from 2019 to 2022. Aecon Utilities has established a presence in the U.S. and sees attractive opportunities to expand its geographic reach and range of services in that market. As of the end of Q2 2023, Aecon Utilities generated TTM revenue and TTM Adjusted EBITDA(3) of $931 million and $80 million, respectively.
“This strategic Investment will accelerate growth in Aecon Utilities, further strengthen Aecon’s balance sheet to take advantage of growth and concession opportunities, and unlock value for our shareholders as we continue our strategic focus on infrastructure solutions delivered under more collaborative models and linked to decarbonization, sustainability and the energy transition,” said Jean-Louis Servranckx, President & Chief Executive Officer, Aecon.
“We are delighted to partner with an experienced and value-added investor in Oaktree to continue to grow Aecon Utilities in Canada and the U.S.,” said Eric MacDonald, Executive Vice President, Aecon Utilities.
Jimmy Lee, Managing Director and Assistant Portfolio Manager in Oaktree’s Power Opportunities Group, said “Aecon Utilities’ strong competitive position, long-term customer relationships and exposure to numerous market tailwinds provide an exceptional foundation for growth. We look forward to bringing to bear our resources and relationships to support Aecon Utilities’ talented leadership team and employees as they execute their strategic plan.”
“Aecon Utilities is widely known as a leading provider of mission critical recurring utility infrastructure services across Canada. We see tremendous opportunity to leverage its capabilities to expand with new and existing customers while maintaining the commitment to workforce safety and exceptional quality for which Aecon Utilities is known,” said Andrew Moir, Senior Vice President in Oaktree’s Power Opportunities Group.