Weitz builds for the future
The second-oldest construction firm in the nation has a new owner with deep pockets that can speed a recovery from the recession
Thursday, February 14, 2013 10:22 AM
Mike Tousley, left, and Kevin Prust say that a sale last year to a multinational company has enabled Weitz to meet the economic recovery head-on.
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In a year of transformation, what stands out at Weitz? Surprisingly enough, Tousley and Prust said it is the company’s safety record. In November, the company surpassed 1 million man-hours without a lost-time injury.
If they’re not going home safely, they are not contributing to their families, their schools, their communities,” Prust said.
At 158 years old, Des Moines-based The Weitz Co. discovered last year that there’s nothing like a merger with a multinational corporation to prepare for an economic recovery.
Weitz agreed in midsummer to be acquired by Orascom Construction Industries, a multinational that at the time had its headquarters in Egypt. It had little foothold in the United States, and Weitz, as the nation’s second-oldest and still one of its largest construction firms, fit the bill.
The purchase came after a period in which Weitz’s revenues were in decline and company leaders scanned the countryside for business opportunities that would keep the company in competition for jobs in the wake of the Great Recession. In the search for extra work, Weitz had attempted, unsuccessfully, to take on construction projects in the North Dakota oil fields.
Kevin Prust, Weitz’s chief financial officer, and Mike Tousley, head of the company’s Iowa and Nebraska operations, said the purchase has placed Weitz in a position to be prepared for jobs that will result from a slowly developing economic recovery.
The fruits of the Orascom deal are playing out in major construction projects set to launch in the spring, and Weitz is hiring project managers, engineers, estimators, carpenters and laborers.
Weitz has been a leader in Greater Des Moines development. Its projects include the first construction in 1917 at Camp Dodge and corporate campuses for Wellmark Blue Cross and Blue Shield downtown and Aviva USA in West Des Moines. It was at the heart of the downtown renaissance in the 1970s and 1980s. The names of its officers and other employees can be found on the board lists of a range of local community organizations.
But in June 2010, the height of the company’s struggle to compete in a shrinking construction market came to a head with the forced resignation of Craig Damos as president and CEO and chairman of the Weitz board of managers. (See accompanying story on page 11.) Weitz was coming off of a year in which revenues were dropping from a high of $1.4 billion in 2008.
According to court documents, the company’s share value declined to $1 billion the following year and to $826 million by the end of 2010.
Prust said that at the time of the sale in July to Orascom, the value of the company’s projects was about $850 million.
Damos was replaced as president and CEO by Len Martling, who brought 29 years of experience in a range of Weitz operations to the table. Glenn DeStigter, who presided as president and CEO at Weitz from the early 1980s to 2006, took a seat as chairman of the board, a position he gave up in March 2012. (Martling was travelling in Guam at the time this story was written and was unavailable for an interview.)
By the end of 2010, Weitz had shuffled its top management and took an eraser to its organizational chart, eliminating nearly seven independent business divisions in order to run a smaller, more efficient organization.
It was not the first change in operations in the history of a company founded by a German immigrant and owned until 1995 by his descendents. When employees bought the company from the Weitz family, it spun off other operations into what have become notable Greater Des Moines businesses, including Alliance Technologies Inc. and Life Care Services Inc.
With the Orascom merger, that organizational chart has been further clarified. Weitz is the center of U.S. operations that will continue its commercial and industrial divisions. A separate entity has been created to handle the construction of fertilizer plants, and there will be a division focused on infrastructure.
Orascom is one of the world’s largest builders of fertilizer plants, few of which operate in the United States. On the day the state of Iowa announced that Orascom would receive $26 million in economic incentives to build a $1.4 billion plant in Lee County, the company announced that it had purchased Weitz.
Prust and Tousley said their company was sought out by Orascom.
Orascom has gone through some changes since it bought Weitz. The company received a $1 billion equity infusion from an investor group that includes Microsoft Corp. founder Bill Gates. It has moved its headquarters to the Netherlands, and it named Michael Bennett as its CEO. Bennett is the former head of Terra Industries Inc., a Sioux City fertilizer maker that was bought in 2010 by CF Industries Holdings Inc.
For Weitz, there has been little noticeable change in its day-to-day operations, Tousley said.
However, the merger has paid immediate dividends for the Weitz book of business.
Tousley said Orascom provides a cash infusion for a company that has been in a poor position to take an equity stake in its projects.
“The thing that’s really different is that because of Orascom’s financial strength, we have the ability to play differently than we have in the past,” he said. “We can take an equity interest; in the past, that is something Weitz couldn’t do.”
An example is an $80 million senior living center in Minnesota that Weitz landed only after Orascom decided to sink its own cash into the project.
“They had investment dollars elsewhere, but hadn’t thought about the United States,” Tousley said. “That’s an $80 million job we wouldn’t have had.”
Prust and Tousley said the purchase has placed Weitz in a position to be prepared for jobs that will result from a slowly developing economic recovery.
Tousley said it “would have taken us exponentially longer” to emerge from the recession without the takeover. “The financial strength is a game changer,” he said.
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