The state’s largest construction company, Weitz Co., is set to be acquired by Egypt’s largest publicly traded company, Orascom Construction Industries (OCI), which also announced plans Wednesday to build a $1.4 billion fertilizer plant in Lee County.
$1.4 billion fertilizer plant
Orascom Construction Industries (OCI), announced Wednesday that it will build a $1.4 billion fertilizer plant in Lee County. The project is the single-largest capital investment project in the state’s history, Gov. Terry Branstad’s office said in a release. Click here for the full story
OCI is headquartered in Cairo, with an office in Belgium and an office in Virginia, and is one of the world's largest fertilizer makers, with operations focused in Egypt, Africa, Asia and Europe. It employs more than 72,000 people, and had revenues of $5.5 billion in 2011.
The proposed acquisition of Weitz, founded in 1855 and run for 140 years by the Weitz family before becoming employee owned in 1995, began last March when OCI approached Weitz for help with the fertilizer plant, said Leonard Martling, Weitz CEO.
“They sought us out. This was unsolicited,” Martling said. “We were not on the market, nor we were we even thinking about being on the market.”
Weitz’s industrial group began working with OCI on some upfront budgeting work for the plant, Martling said.
As time progressed, the two companies found commonalities, which led to the acquisition talks.
Weitz signed a letter of intent Wednesday for the acquisition by OCI, which would like to establish a billion-dollar construction business in the United States, Martling said.
The acquisition agreement is not final without a vote of the Weitz shareholders.
Martling declined to discuss a purchase price or how the acquisition would affect Weitz shareholders until the negotiations and acquisition process is complete. Weitz website says that the number of shareholders has grown to more than 300.
Under the proposed agreement, OCI’s U.S. operations would be under Weitz management, Weitz would retain its name and Des Moines headquarters, all employees will keep their jobs and Martling will remain CEO.
“It’s good for our shareholders and great for our employees,” Martling said. “From the standpoint of our employees it remains business as usual with some additional opportunities for them. From our clients’ standpoint, it most certainly remains business as usual.”
Martling said both companies have common goals. OCI has a federal contract group wanting to expand to the Pacific Rim and Weitz has a federal contracts division and offices in Honolulu, Guam and Seattle. He also said OCI leaders “were comfortable with the management team.”
Disclosure of the Weitz-Orascom deal came on the same afternoon that Gov. Terry Branstad and OCI CEO Nassef Sawiris announced that OCI subsidiary, Iowa Fertilizer Co., will build a $1.4 billion fertilizer plant in Lee County, Iowa’s southeastern most county. The project is the single-largest capital investment project in the state’s history, Gov. Terry Branstad’s office said in a news release. (Click here to read the full story)
The Des Moines Register reported that it is also the richest business attraction incentives package in recent Iowa history and one that likely will get richer.
Orascom CEO Sawiris told Bloomberg that the fertilizer plant, with an annual production capacity of 1.5 to 2 million tons, will take advantage of low natural-gas prices and growing U.S. demand for fertilizer.
He said the investment is OCI’s second in the U.S., following the phased start of production at its $250 million ammonia and methanol plant in Beaumont, Texas, over the last year. Iowa is the biggest corn-producing state and the largest consumer of nitrogen-based fertilizer, according to OCI.
Increasing U.S. natural gas reserves and growing demand for fertilizers have been “game changers,” Sawiris said, making the project “a very attractive investment.”
OFFICIAL PRESS RELEASE BELOW:
The Weitz Company (“Weitz”) announced today it has signed a letter of intent for acquisition by a leading international construction company, Orascom Construction Industries (OCI). Weitz, a United States general contractor based in Des Moines, Iowa is the second oldest commercial general contractor in the United States. Weitz has three core business lines: commercial, federal, and industrial and has typically ranked among the top 50 in Engineering News-Record’s (ENR) Top 400 Contractors list.
“This is an excellent opportunity for us to accelerate our growth plan,” said Leonard Martling, Chairman and Chief Executive Officer of The Weitz Company. “We consider this proposal to better position us to pursue larger industrial projects as a part of one of the world’s top global contractors.” All of Weitz’s current management and employees would be retained following the acquisition.
OCI is a leading international construction contractor and fertilizer producer, employing more than 72,000 people in 35 countries around the globe. The OCI Construction Group provides international engineering and construction services primarily on infrastructure, industrial and high-end commercial projects in Europe, the Middle East and North Africa for public and private clients.
“An acquisition of Weitz would allow OCI to increase its presence and strategically position the company to undertake a variety of commercial, industrial and infrastructure opportunities in the United States,’’ said Osama Bishai, Chief Operating Officer, OCI Construction Group. “We are excited to be able to provide all the necessary support to enable Weitz to grow its business,” added Bishai.
The Weitz Company generated $ 681.5 million of revenue in 2011 and prior to the recent economic downturn generated revenues in excess of $ 1.5 billion. Weitz had a backlog of $ 787.7 million as of 30 June 2012 with federal projects representing 51%, commercial projects 36% and industrial projects 13% of the backlog.
Watts Constructors, the federal business line of Weitz, headquartered in Honolulu, Hawaii, with offices in the U.S. West Coast and Guam, is scheduled to be combined with OCI’s federal division, Contrack International. Contrack is a US-based subsidiary of the OCI Construction Group, located in McLean, Virginia, which pursues federal projects overseas primarily in the Middle East and Central Asia.
Completion of the acquisition will be subject to the negotiation and execution of a binding agreement, respective due diligence and the approval of Weitz shareholders.