Alexander & Baldwin, Inc. and Grace Pacific Corporation announced Thursday that they have entered into a definitive merger agreement for A&B to acquire the privately held Grace for a combination of stock and cash valued at $235 million.
A&B also will be assuming projected net debt of approximately $42 million at closing.
Grace Pacific provides aggregate, hot mix asphalt and road construction and paving services.
Grace Pacific was founded in Hawaii in 1931, and its operations are based exclusively in Hawaii.
“A&B has long been involved in building communities in Hawaii. The addition of Grace to the Company will extend our capabilities to encompass infrastructure development and replacement work, for which we see a steady and growing need in Hawaii," said Stanley M. Kuriyama, A&B’s chairman and chief executive officer. "Grace’s strong, difficult-to-replicate business model, diverse payer base and steady and growing cash flows will increase our local market presence, provide A&B with additional financial capacity to execute on new real estate opportunities in Hawaii, and allow us to initiate a modest quarterly cash dividend."
"Given our strong financial performance as an independent, employee-owned entity, we were not actively looking to sell Grace," noted David C. Hulihee, chairman and chief executive officer of Grace Pacific Corporation. "However, by joining forces with A&B, we will be better able to leverage our combined market knowledge, expertise, asset base and financial strength to capitalize on growth opportunities presented by the improving performance of Hawaii’s economy."
Grace Pacific has approximately 550 employees and 135 shareholders. Seventy-one percent of Grace’s shares are held by five shareholders, including A&B Director Walter Dods, who owns about 12 percent of Grace. Another A&B director, Jeff Watanabe, holds a 1 percent interest in Grace.
The transaction was unanimously approved by special committees and the boards of directors of each company, consisting of directors who did not have interests in Grace Pacific.
Subsequent to closing, A&B anticipates that it will initiate a quarterly cash dividend of $0.04 per share, subject to board approval.
Hawaii’s outlook for infrastructure construction is positive resulting from both announced infrastructure replacement projects and anticipated commercial and residential development activities.
The Honolulu City & County, for example, recently announced its intent to perform $120 million to $150 million in road repairs to the city’s streets in each of the next five years. Grace Pacific's revenue increased by over 20 percent for the six months ended March 31, 2013, compared to the same period last year, reflecting this growth. (Grace Pacific has a fiscal year of October 1 to September 30.)
No reduction in Grace Pacific's workforce is anticipated as a result of the transaction, and David Hulihee will continue to serve as Grace Pacific's chief executive officer.