Granite Construction Inc. announced several actions that it said are designed to position the company to focus on efficiently growing its core civil construction and materials business.
- On Feb. 2, the company entered into a definitive agreement with Inland Pipe Rehabilitation, a portfolio company of investment affiliates of J.F. Lehman & Co., to sell Inliner for a purchase price of $159.7 million. The sale has been unanimously approved by the company’s board of directors and is subject to customary covenants and closing conditions. The transaction is expected to close in the next two to four months.
- The company intends to divest the two remaining businesses within the Water and Mineral Services operating group (WMS). As such, WMS will be considered held for sale and presented as discontinued operations as of Dec. 31, 2021.
- The board of directors authorized an increase in the share repurchase program from $157 million to $300 million.
- During the fourth quarter, the company reorganized its operating groups to improve operating efficiencies and better position the company for long-term growth in alignment with its new strategic plan. Its new operating groups are: California; Mountain (formerly Northwest operating group), which primarily includes offices in Alaska, Nevada, Utah and Washington; and Central (formerly Heavy Civil, Federal and Midwest operating groups), which primarily includes offices in Arizona (formerly in the Northwest operating group), Colorado, Guam, Florida, Illinois and Texas.
- As a result of the above changes to its operating groups and shift in strategy to refocus on its core civil construction and materials business, its new reportable segments will be: Construction and Materials. These changes will be reported in its Form 10-K for the year ended Dec. 31, 2021, as they reflect how its chief operating decision maker now reviews financial information to allocate resources and assess performance. The Construction segment replaces the Transportation, Water and Specialty reportable segments, with the Materials segment for its continuing operations remaining unchanged. A Form 8-K with segment information for each of the previously reported 2021 and 2020 quarterly periods and for the years ended 2020 and 2019 will be filed with the Securities and Exchange Commission after market close on Feb. 14.
“Today’s announcement marks a significant step in the implementation of our new strategic plan,” explained Kyle Larkin, Granite president and CEO. “The divestiture of Inliner and the planned divestitures of Water Resources and Mineral Services reflect our strategy to refocus on our core civil construction and materials business, streamline operational support functions, improve overhead efficiency and better leverage economies of scale. Our vertically-integrated business has been Granite’s strength for decades, and we plan to continue to build our positions in these well-established markets and be opportunistic in pursuing expansion. As we celebrate our centennial year, I want to thank all of our employees for their contributions to Granite.”
Larkin continued, “We are also announcing the reorganization of our operations to align with our new strategic plan. We operate in our markets across three groups, California, Mountain and Central, to contract on public and private civil construction projects where we can utilize our expertise to drive the highest returns for our shareholders. I look forward to further discussing these changes during our fourth-quarter earnings call.”
“The divestitures will result in additional liquidity and increase our already strong cash position,” stated Lisa Curtis, Granite executive vice-president and chief financial officer. “With the increase in our authorized share repurchase program, we have additional flexibility to return value to shareholders, including through share repurchases along with paydown of debt, and we expect to do so in 2022. I look forward to sharing more of our capital allocation plan as we roll out our strategic plan.”