Fluor Corporation FLR recently inked an agreement with the London-based private equity firm Arle Capital Partners to buy Dutch engineering and construction company Stork Holding B.V. Subject to fulfillment of necessary regulatory approvals, the deal will likely close in the first half of 2016. Valued at $755 million, the buyout is expected to supplement Fluor’s earnings per share in 2016.
Post completion, Fluor plans to integrate its Operations & Maintenance business with Stork. The combined group business, named Stork, will be headquartered in the Netherlands. Fluor intends to finance the transaction by issuing debt in international markets. With roughly 19,000 employees, the newly restructured Stork is projected to reap $2.3 billion in revenues annually.
Stork Insight
Stork, a premium provider of maintenance, modification and asset integrity services for multiple industrial facilities including oil & gas, chemicals, petrochemicals and power markets, recorded run-rate revenue of $1.7 billion. The company presently operates in diverse geographies including Continental Europe, United Kingdom, the Middle East, Asia Pacific and the Americas.
Ever since its inception in 1827, the company has built a solid reputation among multiple blue-chip clients. Additionally, Stork deals with “operational expenditures budget” side of business facilities that is practically immune to fluctuations in commodity prices. Keeping in mind such benefits, Fluor has agreed to buy the firm at a price that is almost seven times Stork’s annual EBITDA ($109 million).
Fluor’s Perspective
Flour’s decision to acquire Stork reflects its goal to strengthen its “integrated solutions offerings”. Supported by Stork’s significant presence across multiple sites, Flour will be able to better address its client needs. Furthermore, the deal will lead to a perpetual source of earnings related to maintenance and direct construction activities for Fluor. Also, this acquisition will help Fluor expand its global footprint by leveraging Stork’s complementary portfolio.
Overall, Fluor maintains a strong focus in enhancing its competitive position in the market through prudent leadership initiatives and strategic alliances. During the third quarter, Fluor formed a joint venture with Offshore Oil Engineering Co., Ltd. and Sacyr Industrial as part of its restructuring initiative to improve control and delivery of projects. Given Stork’s diverse geographic presence and profound expertise, the recent buyout is expected to unlock multiple commercial opportunities for Fluor, going forward.
Fluor currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Dycom Industries Inc. DY, KBR, Inc. KBR and Federal Signal Corp. FSS. While Dycom sports a Zacks Rank #1 (Strong Buy), both KBR and Federal Signal hold a Zacks Rank #2 (Buy).
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