BE&K Building Group Reborn Via KBR's $28M Sale to Pernix Group
As part of a streamlining announced last December, Houston-based engineer-contractor KBR is selling its building construction unit to Illinois construction firm Pernix Group Inc. for $28 million, including $6 million in working capital, the firms said June 10.
Under the deal, set to close by June 30, Lombard-based Pernix is buying the operation as the BE&K Building Group, reverting to its origin as part of independent open-shop contractor BE&K. KBR bought BE&K in 2008 for $550 million in cash.
At the time, the sale included the building unit as well as Saginaw and SW&B Construction Corp.; engineering companies As-Built Services, QBEK, BE&K Government Group and BE&K International; and holding company Allstates Technical Services LLC.
“We are pleased to continue the business transformation we set out to accomplish last December and selling the Building Group is an important part of that strategy,” KBR President and CEO Stuart Bradie said in a press statement.
Last month, Graham Hill, a KBR executive vice president, noted the strategy as part of the ongoing company transformation. “That is a very competitive market and that is not our core competency,” Hill said. “The buildings group would be better off with a contractor specializing in buildings.”
The transformation follows Bradie's arrival in June 2014 as new CEO of KBR. He is a former WorleyParsons executive. The company also is shedding its EPC units in power and infrastructure, to concentrate in core oil and gas markets as well as in technology consulting and government services, according to past comments by Bradie and others.
The Charlotte, N.C.-based BE&K buildings unit had been one of the Southeast’s most active contractors after the initial sale to KBR. During 2010, the buildings group reported $683.7 million in Southeast revenue, earning a No. 4 position on ENR Southeast’s Top Contractors ranking.
Pernix Group President and CEO Nidal Z. Zayed said the acquisition would boost the firm’s work in R&D, advanced manufacturing, commercial and mixed use markets, among others domestically, help it win new work internationally. He also sees the unit assisting in Pernix efforts to develop niches in power and federal markets.
At a June 4 investor briefing in New York sponsored by Credit Suisse, Bradie and firm CFO Brian Ferraioli told attendees that with the restructuring, the firm will realize about $200 million in annual cost savings by the end of next year, although most will be by the end of this year. The firm said previously that the changes would cost the firm up to $1 billion in one-time charges.
Credit Suisse lead E&C sector analyst Jamie Cook said: "We continue to favor KBR as the restructuring/turnaround story appears on track."
Pernix reported on May 21 a decline in its first quarter revenue to $10.6 million from $15 million in the same quarter a year earlier, due to project completions, it said. Profit also declined. The firm reported about $85 million in 2014 revenue, with power generation volume up 13%.
KBR estimates about $5 billion in total 2015 revenue. The firm ranks 12th on ENR's list of the Top 500 Design Firms, with $1.5 billion in 2014 design revenue.