Mergers and Acquisitions
MasTec Makes $1.1B Bid to Buy Renewables Builder
IEA specializes in wind and solar work, which MasTec says will allow it to meet an expected increase in demand.
Image courtesy of IEA
Specialty energy contractor MasTec Inc. says it will expand its clean energy and infrastructure segment with the acquisition of renewables specialist Infrastructure and Energy Alternatives Inc. in a deal valued at $1.1 billion, the companies announced July 25.
The acquisition of Indianapolis-based IEA will allow MasTec to add union-labor clean energy power generation services, and to expand its non-union craft labor capacity, said Jose Mas, CEO of the Coral Gables, Fla.-based firm. That combination “will provide increased scale and capacity needed to meet expected growing customer demand for renewable power generation over the next decade,” he said.
Mas also anticipates that IEA’s renewable power generation services will complement MasTec’s capacity in electrical transmission and distribution.
IEA is expecting between $2.3 billion and $2.5 billion in annual revenue this year, including about $1.7 billion from wind and solar work, and $800 million in civil work, which is primarily related to transportation and environmental remediation. The company ranks at No. 42 on ENR’s 2022 Top 400 Contractors list, reporting $2.1 billion in 2021 revenue.
The firm has noted completion of more than 260 utility-scale wind and solar projects across North America.
JP Roehm, CEO of IEA, noted the two firms' "joint resources and capabilities" in serving the renewable energy, power delivery and infrastructure markets. He is set to remain in the role.
MasTec says it expects to close the deal late this year. It will pay $14 per share of IEA, 75% in cash and 25% in stock.
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MasTec ranks No. 3 on ENR’s 2021 Top 600 Specialty Contractors list with $6.3 billion in 2020 revenue. The firm says it is anticipating $9.2 billion in revenue in 2022. The company’s largest segment is communications, but it expects its power delivery unit to surpass its oil and gas unit this year.
MasTec anticipates the IEA purchase will make its clean energy and infrastructure unit its largest segment in 2023.
As ENR previously reported, MasTec has been moving to diversify its offerings. Last year, MasTec acquired Henkels & McCoy Group for about $600 million in cash and stock.
Mas also announced that MasTec was updating its 2022 earnings guidance expectation both to reflect the acquisition and pressures on its margins. He says the company is expecting higher costs for fuel, labor, materials and project inefficiencies in the second half of the year, with little ability to mitigate them or pass costs to customers.
“We believe that these impacts will be largely mitigated in 2023 as new projects and contractual cost escalators take effect,” he said.
"We believe the price for IEA was reasonable, although timing for another deal was a bit earlier than expected but it accelerates MasTec's portfolio optimization story," said Jamie Cook, lead industry stock analyst for Credit Suisse. "We like the portfolio acceleration; however, guidance cuts for MasTec has created a credibility issue. We believe [it] needs a couple of quarters of execution to re-rate."
