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Aecon Group Inc T.ARE

Alternate Symbol(s):  AEGXF

Aecon Group Inc. is a Canada-based construction and infrastructure development company. The Company delivers integrated solutions to private and public sector clients throughout Canada and other countries. It operates through two segments within the infrastructure development industry: Construction and Concessions. Its Construction segment includes all aspects of the construction of both public and private infrastructure, primarily in Canada, and internationally and focuses primarily on the civil infrastructure, urban transportation solutions, nuclear power infrastructure, utility infrastructure and industrial infrastructure. Its Concessions segment include the development, financing, build and operation of construction projects primarily by way of public-private partnership contract structures, as well as integrating the services of all project participants. The Company’s projects include Annacis Water Supply Tunnel, Bell Canada Gigabit Fiber Service, Finch West LRT, and others.


TSX:ARE - Post by User

Comment by Meesha1on Oct 24, 2023 10:26pm
141 Views
Post# 35699383

RE:Meesha - It is a sale of the utilities br. for the US market

RE:Meesha - It is a sale of the utilities br. for the US marketAgain, I think the stock is cheap. Its just that this transaction reeks of desperation. The conversion price is 9.0x - 9.3x based on a trailing 12 month EBITDA. As years pass and EBITDA grows, the conversion price becomes a much lower multiple. Ultimately, Aecon will buy back the preferred under one of the following conditions:

Aecon has the option to purchase the Preferred Equity for cash at any time at a value equivalent to the greatest of: (a) the as-converted value of the Preferred Equity, (b) the accreted value of the Preferred Equity, and (c) 1.5x the Net Investment Amount less all cash dividends and distributions paid to Oaktree.

The worst case for Oaktree is they get back their principal plus accrued interest. The other options are a bigger win for them. This is a really round about and expensive way to raise $150MM. 

In the end I feel like Oaktree is getting a 12% to 14% coupon AND a 7yr option to buy 27% of Aecon Utilities at a forward multiple that is very low (assuming revenue continues to grow). And Aecon can terminate that option buy paying them back more than their principal. Why such a sweet deal? For their contacts and experience? Wow, thats quite the roladex! 

I'm just confused. I fully admit I could be completely wrong. We shall see.
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