- Granite Construction reversed course on its plans to sell its water resources and mineral services operations Monday, saying that current market conditions undermined its efforts “to secure appropriate value for the businesses.”
- The firm will reincorporate financial results for the businesses in its continuing operations, and will no longer classify their assets and liabilities as held for sale. The move means that it will file quarterly segment information for the units for previously reported quarters in 2021 and 2022, and full year results for 2020 and 2021.
- Kyle Larkin, Granite’s president and CEO, said the firm saw significant interest in the units, but that the timing to sell them ultimately wasn’t right. “Both businesses have performed very well this year, supported by strong underlying market demand which remains resilient,” Larkin said in a statement. “The ongoing drought concerns across much of the country, coupled with the strong demand for mineral resources, make us optimistic about the outlook for these businesses.”
Granite announced in February that the units were on the selling block as part of its new strategic plan, following the sale of its Inliner trenchless and pipe rehabilitation services unit to J.F. Lehman & Company for $159.7 million.
The about face now comes as the firm has made progress refocusing on smaller, less complex projects that it can complete quickly. The plans to sell unraveled as borrowing costs for financial capital have increased, due to the Federal Reserve raising interest rates in its attempt to tame rampant inflation.
Since an accounting scandal in its heavy civil group in 2019, Granite has had to restate three years of its financial results. Most recently, it agreed to pay the Securities and Exchange Commission $12 million to settle charges against it.
But the pullback on the announced plan to sell also comes as funds from the $1.2 trillion Infrastructure Investment and Jobs Act begin trickling down to the states. That could ultimately mean increased opportunities for the business units.
“Our teams’ ability to identify and develop new water sources and deliver potable water to communities complements our civil construction business,” Larkin said. “We believe these businesses will drive greater shareholder value and be accretive to EBITDA margin.”
In unrelated news, Granite announced that it won a $20 million airport runaway project in Tucson, Arizona, and a $17 million job to improve the Duncan Creek Diversion Dam near Foresthill, California.