BISMARCK, N.D., Nov. 2, 2023
/PRNewswire/ -- MDU Resources Group, Inc. (NYSE: MDU) today
announced that its board of directors has approved a plan to spin
off the company's wholly owned construction services business, MDU
Construction Services Group, Inc., to the shareholders of MDU
Resources, resulting in two independent, publicly traded companies.
The spinoff is expected to be effected as a tax-free spinoff to MDU
Resources and its shareholders and be complete in late 2024.
MDU Resources' board believes this separation should leave each
company well-capitalized and strongly positioned to grow and create
value for shareholders.
"We expect this strategic move to significantly enhance the
value within our businesses by creating two focused, independent
companies that are publicly traded while achieving our stated goal
of transforming MDU Resources into a pure-play regulated energy
delivery business," said David L.
Goodin, president and CEO of MDU Resources. "We are proud of
the growth our businesses have experienced and are confident now is
the time for them to operate separately to best serve our
customers, employees, communities and shareholders."
After the spinoff, MDU Resources and MDU Construction Services
Group will be able to more directly focus resources and capital to
achieve the businesses' respective strategic goals, Goodin
said.
"MDU Construction Services Group was started in 1997 and has
grown significantly, achieving record revenues of $2.7 billion and record earnings of $124.8 million in 2022," Goodin said. "As
announced today in a separate news release, the business achieved
record third quarter earnings. With backlog of $1.85 billion as of Sept.
30, MDU Construction Services Group is positioned to
continue on its path of significant growth."
MDU Resources Chair Dennis W.
Johnson said the board believes MDU Construction Services
Group is ready to continue its success as a stand-alone public
company.
"The board has determined that a tax-free spinoff of MDU
Construction Services Group could unlock significant value for
shareholders," Johnson said. "We will diligently oversee the
spinoff process to ensure MDU Resources and MDU Construction
Services Group are optimally positioned to become independent
companies with the potential to generate attractive shareholder
returns."
Jeffrey S. Thiede, president and
CEO of MDU Construction Services Group, attributed MDU Construction
Services Group's success to the efforts of its employees.
"Our employees have been delivering outstanding results for
several consecutive years through their hard work and commitment to
safety and customer satisfaction," Thiede said. "I'm proud of our
team, and I'm excited about our future as a stand-alone specialty
construction services provider."
Anticipated Benefits of the Spinoff
MDU Resources'
board believes the proposed spinoff should unlock inherent value in
both MDU Resources and MDU Construction Services Group, each of
which has unique growth prospects and investment opportunities. The
expected benefits of the spinoff include:
- Heightened strategic focus: Each company will be able to
pursue strategies specific to the individual industries in which it
operates and use equity tailored to its own business to enhance
acquisition programs and retention and hiring.
- Optimized capital structures: Each company will benefit
from a distinct capital structure and financial policies that are
tailored to meet its separate business profile and operational
needs.
- Tailored capital allocation strategies: Each company
will have more flexibility to deploy capital toward its specific
growth opportunities.
- Distinct investment opportunities: Investors will have
two compelling investment opportunities and be able to better
assess the value of each company based on separate operational and
financial characteristics.
MDU Resources to be Pure-Play Regulated Energy Delivery
Business
After the spinoff is complete, MDU Resources will
be a pure-play regulated energy delivery business with headquarters
remaining in Bismarck, North
Dakota. As of Sept. 30, MDU
Resources regulated energy delivery businesses had a combined rate
base of approximately $4 billion. The
combined rate base growth is expected to be 6%-7% on a compounded
annual basis over the next five years.
The company's electric and natural gas utilities, Cascade
Natural Gas Corp., Intermountain Gas Co. and Montana-Dakota
Utilities, provide affordable, reliable service to 1.2 million
customers across eight states. The utility business is focused on
providing safe, reliable service to its growing customer base while
continually investing in modernizing its infrastructure.
The company's pipeline business, WBI Energy, Inc., provides
natural gas transportation through 3,800 miles of regulated
pipeline systems in the Rocky Mountains and northern Great Plains
of the U.S., as well as underground natural gas storage services
with North America's largest
naturally occurring storage field. WBI Energy is focused on
expanding its regulated pipeline system.
MDU Resources expects earnings from its regulated energy
delivery businesses in the range of $155
million to $165 million for
2023.
On May 31, 2023, MDU Resources
successfully completed a tax-free spinoff of its construction
materials business, Knife River Corporation.
MDU Construction Services Group a Leading Electrical,
Mechanical, Transmission, Distribution Services Provider
MDU
Construction Services Group, which provides a full spectrum of
construction services across the U.S. through its electrical and
mechanical (E&M), and transmission and distribution (T&D)
segments, is ranked No. 10 on Engineering News-Record magazine's
2023 Top 600 Specialty Contractors list and No. 4 on Electrical
Construction & Maintenance magazine's 2023 Top 50 Electrical
Contractors list.
MDU Construction Services Group also will remain headquartered
in Bismarck. The business has more
than 9,000 employees during peak construction season and is
authorized to work in 43 states and the District of Columbia.
MDU Construction Services Group's E&M specialty services
include preconstruction, construction and maintenance of electrical
and communication wiring; mechanical heating, ventilating and air
conditioning (HVAC) and plumbing; and fire suppression systems. It
also offers low-voltage services, renewables and packaged controls
and manufacturing.
Its T&D specialty services include construction and
maintenance of overhead and underground electrical, gas and
communication infrastructure, as well as manufacturing and
distribution of line construction equipment and tools. Its
capabilities include excavation and underground boring,
substations, signals and lighting, and emergency restoration.
MDU Construction Services Group serves diverse customers in
numerous markets, including utility, manufacturing, transportation,
commercial, industrial, institutional, renewable and
governmental.
MDU Construction Services Group has a history of successful,
rapid growth, starting in 1997 with its first acquisition. Today,
it is comprised of 15 companies and is expected to have revenues in
the range of $2.8 billion to
$3.0 billion and EBITDA of
$210 million to $230 million for 2023.
Spinoff Transaction Details
It is expected with the
spinoff that MDU Resources' shareholders will retain their current
shares of MDU Resources stock and receive a pro rata distribution
of shares of MDU Construction Services Group stock in a transaction
that is expected to be tax free to MDU Resources and its
shareholders for U.S. federal income tax purposes. The number of
shares to be distributed and the specific transaction structure
will be determined before the spinoff is complete.
The spinoff is expected to be complete in late 2024. It is
subject to customary conditions, including final approval by MDU
Resources' board of directors, receipt of a tax opinion and a
private letter ruling from the Internal Revenue Service, if
determined to be advisable, and the filing and declaration of
effectiveness of a Form 10 registration statement with the U.S.
Securities and Exchange Commission. No assurances can be given
about the form that a spinoff transaction may take, the specific
terms or timing of it, or that a spinoff will, in fact, occur.
MDU Resources is committed to establishing strong capital
allocation strategies for each business that align with each
business's long-term goals. Post-spinoff, MDU Resources intends to
maintain a long-term dividend payout ratio target of 60% to 70% of
regulated energy delivery earnings. MDU Construction Services
Group's dividend policy will be determined in the future,
consistent with the company's stated capital allocation strategies.
Further details about capital structure, governance and other
elements of the spinoff will be announced later.
Third Quarter 2023 Financial Results
MDU Resources
also announced today its third quarter financial results, which can
be found on the company's website at www.mdu.com.
Conference Call
MDU Resources will discuss the spinoff
and the company's third quarter financial results during a webcast
at 2 p.m. EDT today. The event can be
accessed at www.mdu.com. Replays will be available on the
website.
MDU Resources also will postpone its Analyst and Investor Day,
originally slated for Nov. 21, until
late in the first quarter of 2024 to provide more details on the
planned spinoff of MDU Construction Services Group.
Advisors
J.P. Morgan Securities LLC and PJT Partners
are serving as financial advisors for the transaction. Wachtell,
Lipton, Rosen & Katz is serving as legal advisor.
About MDU Resources
MDU Resources Group, Inc., a
member of the S&P MidCap 400 index, provides essential products
and services through its regulated energy delivery and construction
services businesses. For more information about MDU Resources,
visit www.mdu.com or contact the Investor Relations Department at
investor@mduresources.com.
About MDU Construction Services Group
MDU
Construction Services Group, Inc. provides electrical and
mechanical, and transmission and distribution specialty contracting
services. It serves customers in the utility, manufacturing,
transportation, commercial, industrial, institutional, renewable
and government markets.
Forward-Looking Statements
This news release
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 regarding MDU
Resources and the proposed spinoff of MDU Construction Services
Group that are subject to risks and uncertainties and are made
pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1993, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. The words "believe,"
"continue," "could," "expect," "anticipate," "intends," "estimate,"
"forecast," "project," "should," "may," "will," "would" or the
negative thereof and similar expressions are intended to identify
such forward-looking statements. These forward-looking statements,
including key growth strategies, projections, certain assumptions
and strategies of MDU Resources and the independent companies
following the proposed spinoff, the anticipated benefits of the
spinoff, and the expected timing of completion of the spinoff, are
only predictions and involve known and unknown risks and
uncertainties, many of which are beyond MDU Resources' control, and
could cause actual results to differ materially from those
indicated in such forward-looking statements. Although MDU
Resources believes that its expectations are based on reasonable
assumptions, current expectations involve a number of risks and
uncertainties.
With respect to forward-looking statements contained herein,
a number of factors could cause actual outcomes to vary materially.
These factors include, but are not limited to, risks relating to
the impact of the COVID-19 pandemic on the business (including
impacts on employees and contractors and disruptions to operations
and the supply chain); new or changing laws and regulations
impacting the business (including changes in pipeline safety
regulations and environmental law); supply chain disruptions
(including price fluctuations and supply of materials necessary for
operations); the adverse impact of cyberattacks on operations;
competitive factors including technological advances and customer
demands; pricing and market pressures; ability to successfully
integrate any businesses acquired; issuance of new or revised
accounting standards; risks associated with the impact, timing or
terms of the spinoff; risks associated with the expected benefits
and costs of the spinoff, including the risk that the expected
benefits of the spinoff will not be realized within the expected
timeframe, in full or at all, and the risk that conditions to the
spinoff will not be satisfied and/or that the spinoff will not be
completed within the expected timeframe, on the expected terms or
at all; the expected qualification of the spinoff as a tax-free
transaction for U.S. federal income tax purposes, including whether
or not an IRS ruling will be sought or obtained; the risk that any
consents or approvals required in connection with the spinoff will
not be received or obtained within the expected timeframe, on the
expected terms or at all; risks associated with expected financing
transactions undertaken in connection with the spinoff and risks
associated with indebtedness incurred in connection with the
spinoff; the risk that dis-synergy costs, costs of restructuring
transactions and other costs incurred in connection with the
spinoff will exceed estimates; and the impact of the spinoff on the
businesses and the risk that the spinoff may be more difficult,
time consuming or costly than expected, including the impact on
resources, systems, procedures and controls, diversion of
management's attention and the impact on relationships with
customers, suppliers, employees and other business counterparties,
as well as the various important factors listed in Part I, Item 1A
- Risk Factors in MDU Resources' Annual Report on Form 10-K for the
fiscal year ended Dec. 31, 2022,
which was filed with the SEC on Feb. 24,
2023, and subsequent filings with the SEC.
Changes in such assumptions and factors could cause actual
future results to differ materially. All forward-looking statements
in this news release are expressly qualified by such cautionary
statements and by reference to the underlying assumptions. Undue
reliance should not be placed on forward-looking statements, which
speak only as of the date they are made. Except as required by law,
the company does not undertake to update forward-looking
statements, whether as a result of new information, future events
or otherwise.
Non-GAAP Financial Measures
Throughout this news
release, MDU Resources presents financial information prepared in
accordance with GAAP, as well as Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA), which is considered a
non-GAAP financial measure. The company believes these non-GAAP
financial measures are useful to investors by providing meaningful
information about operational efficiency compared to the company's
peers by excluding the impacts of differences in tax jurisdictions
and structures, debt levels and capital investment. The company's
management uses the non-GAAP financial measures in conjunction with
GAAP results when evaluating the company's operating results
internally and calculating compensation packages.
Non-GAAP financial measures are not standardized; therefore,
it may not be possible to compare such financial measures with
other companies' non-GAAP financial measures having the same or
similar names. The presentation of this additional information is
not meant to be considered a substitute for financial measures
prepared in accordance with GAAP. The company strongly encourages
investors to review the consolidated financial statements in their
entirety and to not rely on any single financial measure.
|
Three Months
Ended
|
Nine Months
Ended
|
|
September 30,
|
September 30,
|
|
2023
|
2022
|
2023
|
2022
|
|
(In
millions)
|
Net income
|
$74.9
|
$147.9
|
$244.0
|
$250.4
|
Discontinued
operations, net of tax
|
(3.3)
|
105.6
|
(65.7)
|
103.5
|
Income from continuing
operations
|
78.2
|
42.3
|
309.7
|
146.9
|
Adjustments:
|
|
|
|
|
Interest
expense
|
32.1
|
20.2
|
82.6
|
58.3
|
Income
taxes
|
13.3
|
4.3
|
92.3
|
28.3
|
Depreciation,
depletion and amortization
|
53.1
|
51.8
|
158.9
|
158.6
|
EBITDA from continuing
operations
|
$176.7
|
$118.6
|
$643.5
|
$392.1
|
Adjustments:
|
|
|
|
|
Less: Unrealized
gain on investment in Knife River, net of tax
|
22.8
|
-
|
113.6
|
-
|
Costs
attributable to strategic initiatives, net of tax
|
3.2
|
-
|
9.8
|
-
|
Adjusted EBITDA from
continuing operations
|
$157.1
|
$118.6
|
$539.7
|
$392.1
|
|
|
|
|
|
|
|
|
Media Contacts: Laura Lueder, MDU Resources manager
of communications and public relations, 701-530-1095
Andrea Blessum, MDU Construction
Services Group senior public relations representative,
701-202-5052
Investor Contact: Brent
Miller, assistant treasurer, 701-530-1730
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SOURCE MDU Resources Group, Inc.