Quanta Services Inc.
(PWR) recently agreed to acquire privately held Price Gregory Services Inc., a leading natural gas and oil transmission pipeline infrastructure service provider in North America, in a cash and stock transaction valued at about $350 million.

According to the deal Quanta will issue approximately 11.1 million shares of common stock worth $250 million, and will pay nearly $100 million in cash, subject to adjustment, to Price Gregory shareholders.

Price Gregory is a leading energy infrastructure services provider of its kind, specializing in the construction of large diameter transmission pipelines. Building on Quanta’s strength in electric power business, this acquisition strongly positions the company as a leader in the North American energy transmission infrastructure market and will help it to take advantage of the positive long-term outlook for the natural gas industry.

Price Gregory had revenue of more than $1.41 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) of $258 million for the year ended Dec. 31, 2008. It is expected to generate sales in the range of $1.1 billion to $1.2 billion and EBITDA between $170 million and $190 million for the year ended Dec. 31, 2009 and revenue of $700 million to $900 million in 2010.

The deal is expected to be accretive to Quanta’s earnings per share before amortization expenses by 13 cents to 21 cents per share in 2010. Beyond 2010, Price Gregory’s sales and operating income are expected to grow on the strength of increasing demand for natural gas infrastructure.

The transaction, subject to regulatory approvals, is expected to close in the fourth quarter of 2009. J.P. Morgan Securities Inc. is acting as exclusive financial advisor to Quanta Services.

Quanta Services Inc. provides specialty contracting services to the transmission and distribution sector of the North American electric utility industry. Its major competitors are EMCOR Group Inc. (EME), Integrated Electrical Services Inc. (IESC) and MYR Group Inc. (MYRG). We currently have a Neutral recommendation on Quanta Services.

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