Slide 1: Layne / Granite Merger Update May 2018
Investor Presentation Layne / Granite Merger Update May 2018
Slide 2: Cautionary Note to Investors
Cautionary Note to Investors Forward-Looking Statements All statements in this presentation (and oral statements made regarding the subjects of this presentation) other than historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended,
Slide 3: Transaction Summary
Transaction Summary (1) Transaction Structure and Consideration Stock-for-stock transaction Fixed exchange ratio of 0.27 Granite shares for each share of Layne common stock 33% premium to Layne shareholders based on VWAP for Granite and Layne shares over the 90 trading days prior to merger announcem
Slide 4: Transaction Summary (continued)
Transaction Summary (continued) Ownership and Governance Granite: 88% ownership of pro forma combined company Layne: 12% ownership of pro forma combined company (excluding any impact from convertible notes) Granite Board of Directors to be expanded to include one director from Layne Approvals and Cl
Slide 5: Company Profile; Process and Merger Rationale; Valuation Perspective
Company Profile Process and Merger Rationale Valuation Perspective
Slide 6: Nationally recognized leader within large addressable market
Nationally recognized leader within large addressable market Drilling Repair and maintenance Treatment New Water Midstream business for energy sector Best-in-class operator positioned to capitalize on growing mining activity Exploratory and mine site drilling Borehole services Mine water management
Slide 7: Inliner Market Dynamics / Drivers
Inliner Market Dynamics / Drivers $8+ billion municipal rehabilitation market growing faster than GDP (1) Regulations mandating customers to rehabilitate 20,000 potential customers with nearly 1 million miles of wastewater pipe (2) 45% of U.S. infrastructure projected to be in “poor” condition by 20
Slide 8: Water Resources
Water Resources Global Water Intelligence Layne estimates See slide 32 for reconciliation of GAAP to non-GAAP items Revenues FY18 Revenue by Service ($ Millions) Market Dynamics / Drivers $11+ billion market growing at greater than GDP growth rates (1) 3+ million existing non-residential water wells
Slide 9: Water Midstream
Water Midstream Market Dynamics / Drivers $23 billion in U.S. oilfield water management spending in 2016(1) Market growing significantly due to longer horizontal drilling lengths and more water per lateral foot Water in U.S. drilling and completion operations expected to grow from 2.9 billion barrel
Slide 10: Mineral Services
Mineral Services S&P Global Market Intelligence Excludes $11.7 million of restructuring costs in FY16; includes dividends received from Affiliates; see slide 32 for reconciliation of GAAP to non-GAAP items Revenues ($ Millions) Market Dynamics / Drivers $7 billion mining capex market in the Americas
Slide 11: Capital Structure Overview
Capital Structure Overview 4.25% Convertible Notes 2018 Expected Maturity 8.00% Convertible Notes 2018 Expected Maturity Revolving Credit Facility 2018 Expected Maturity $100 million facility size $0 funded Expected maturity: 7/15/18 Secured by substantially all assets LIBOR plus 3.25% to 3.75% pric
Slide 12: Recent Performance Summary
Recent Performance Summary Layne FY19 EBITDA forecast included in proxy statement/prospectus Outstanding debt of $170 million par value; Adjusted EBITDA of $35 million in FY18 per Layne 1/31/18 10-K and $52 million in FY19 per proxy statement/prospectus Assumes conversion of $100 million par value o
Slide 13: Company Profile; Process and Merger Rationale; Valuation Perspective
Company Profile Process and Merger Rationale Valuation Perspective
Slide 14: Key Considerations for Layne as a Standalone Company
Key Considerations for Layne as a Standalone Company As a small-cap public company, Layne’s stock price valuation has struggled due in part to its diverse operating segments, a relatively complicated investor story, and capital constraints. There are limited opportunities to grow the Inliner divisio
Slide 15: Background to the Merger
Background to the Merger As part of its regular evaluation of strategic alternatives, Layne, directly or through its advisors, held discussions with numerous and various potential strategic and financial counterparties during the two years prior to signing of the Merger Agreement. These discussions
Slide 16: Granite's Offer Timeline
Granite’s Offer Timeline Fall 2016 – Granite approached Layne on an unsolicited basis. December 2016 – Granite offered to acquire Layne for $11.75 per share in cash or a combination of cash and Granite stock (“December 2016 Proposal”). Layne rejected the offer. April 2017 – Layne designated two boar
Slide 17: Combination Fit
Combination Fit One of the nation’s largest infrastructure contractors and construction materials producers Significant leadership position in transportation and other infrastructure sectors Developing water infrastructure business Identified strategy to expand in water sector #1 in Water Well Drill
Slide 18: Merger Creates Wider Geographic Reach
Merger Creates Wider Geographic Reach Locations Locations
Slide 19: Strategic Rationale for Layne and Granite Shareholders
Strategic Rationale for Layne and Granite Shareholders The combined entity will become a stronger operator in the water infrastructure and pipe rehabilitation market, with the scale and resources to become the market leader Enhanced Scale: Over $600 million of water-related revenues and nearly 7,000
Slide 20: Company Profile; Process and Merger Rationale; Valuation Perspective
Company Profile Process and Merger Rationale Valuation Perspective
Slide 21: Key Transaction Metrics
Key Transaction Metrics Valuation Metrics At Announcement (2/14/2018) Current (5/16/2018) Implied Offer Price $17.00(1) $15.91(2) Premium over the unaffected share price on 2/13/2018 35% 26% EV/CY 2018E EBITDA(3) 10.7x 10.1x EV/FY 2019E EBITDA(4) 13.2x 12.4x Implied Offer Price to Book Value(5) 5.9x
Slide 22: Fairness Opinion Summary
Implied Offer Price at Announcement(1) $17.00 Layne’s Unaffected Share Price on 2/13/2018 $12.62 Fairness Opinion Summary Source: Proxy statement/prospectus Based on the Exchange Ratio and the 90-day VWAP of Granite Common Stock as of February 13, 2018 Jefferies analyst estimated a price target of $
Slide 23: Layne's Stock Price has Outperformed Peers Since Merger Announcement
Layne’s Stock Price has Outperformed Peers Since Merger Announcement Source: FactSet data as of 5/16/2018 *Peer group weighted by market capitalization and includes AEGN, MTZ, PRIM, STN-TSE and WTTR $12.62 price on 2/13/2018 $15.76 price on 5/16/2018 Indexed Price Performance (Since One Day Prior to
Slide 24: Layne is Trading at a Significant Premium to Its Historical Multiple
Layne is Trading at a Significant Premium to Its Historical Multiple Source: FactSet (1) NTM EBITDA for Layne is $52M for the calendar year ended December 31, 2018 per proxy statement/prospectus 1-day Prior to Merger Announcement (2/13/2018) Current (5/16/2018) Enterprise Value to NTM EBITDA(1)
Slide 25: Going Forward, Layne Should Benefit from Granite's Higher Valuation Multiple
Going Forward, Layne Should Benefit from Granite’s Higher Valuation Multiple Source: FactSet data as of 2/13/2018 Enterprise Value / NTM EBITDA: 5 Years Prior to Merger Announcement
Slide 26: Granite Research Analyst Outlook
Granite Research Analyst Outlook Source: Equity research, Factset as of 5/16/2018 100% of the equity research analysts that cover Granite today have a buy rating on the stock The average price target of $78.22/share represents a 32.7% premium to Granite’s closing price of $58.94 on 5/16/2018
Slide 27: Granite Research Analyst Commentary
Granite Research Analyst Commentary Source: Equity research, Factset “Granite Construction’s proposed purchase of Layne Christensen (LAYN) enhances management’s strategic plan towards a more diverse US infrastructure solution provider…We view integrating Granite’s Kenny pipe rehab/water/underground
Slide 28: Summary
Summary Layne evaluated numerous strategic alternatives prior to entering into the proposed merger with Granite. During the review of strategic alternatives, no offer to acquire Layne or any of its business segments was received, other than from Granite. The final offer by Granite was significantly
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Slide 30: Commentary on SOTP from Layne's November Presentation
Commentary on SOTP from Layne’s November Investor Presentation Source: November 2017 Investor Presentation, Company filings Potential Sum-of-the-Parts Valuation Analysis as shown in November 2017 Southwest IDEAS Investor Conference Excludes valuation of Corporate Overhead ($20.3mm in FY’18) Original
Slide 31: Total Adjusted EBITDA: Use of Non-GAAP Financial Information
Total Adjusted EBITDA Use of Non-GAAP Financial Information Layne’s measure of Total Adjusted EBITDA, which may not be comparable to other companies’ measure of Total Adjusted EBITDA, represents net income (loss) before discontinued operations, taxes, interest, depreciation and amortization, gain or
Slide 32: Segment Adjusted EBITDA
Segment Adjusted EBITDA Inliner Mineral Services Water Resources Note: Layne adopted the new revenue recognition standard as of February 1, 2018. The effect of the adoption of this standard has not been retroactively recast into the above tables as presented.
Slide 33: Total Adjusted EBITDA Layne Christensen Company
Total Adjusted EBITDA Layne Christensen Company Note: Layne adopted the new revenue recognition standard as of February 1, 2018. The effect of the adoption of this standard has not been retroactively recast into the above tables as presented. Layne FY19 EBITDA forecast included in proxy statement/pr