Construction BUSINESS

Turner’s acquisition of Dornan is both a step forward for ACS Group’s new Strategic Plan and for the sector, David Keniry writes.

ACS Group said today that the agreement to acquire Cork-headquartered specialist engineering contractor Dornan Engineering Group by Turner Construction Company will support strategic expansion in Europe, especially in high-tech.

In May, Turner was named the top contractor in the United States by Engineering News-Record. Turner has held the top spot for the past four years. New York-headquartered Turner and its parent company Essen- headquartered HOCHTIEF are part of the ACS Group of companies which has 140,000 employees worldwide and had revenue of €35.7 billion in 2023.

In its H1 results released today, the Madrid-headquartered group said Turner continued with its strategic plan for international growth with the acquisition of Dornan, ‘one of the three largest companies in its field in Europe, active in the development of data centres, biotechnology facilities and industrial projects in multiple sectors.’

ACS Group’s net attributable profit in H1 2024 was € 416 million, up 8.1% due to solid operating performance from all activities, especially Turner in North America, and the consolidation of Thiess, the global leader in diversified mining services, following the acquisition by CIMIC of a further 10% investment in April. EPS grew by 8.8% to € 1.62. The Group’s ordinary net profit, excluding extraordinary results in both years increased by 11.4% to € 335 million.

Around 50% of awards came from new-generation infrastructure markets driven by strong growth in the digital infrastructure segment, with major data centre contracts in all regions.

Following the announcement of the agreement to acquire Dornan, ACS Group said it had taken a new step in the progress and development of its cohesive strategy with the acquisition of Dornan by Turner. ACS added Dornan is one of Europe’s leading specialists in the advanced technology sector and serves blue-chip clients with operations in eight European countries including the UK, the Netherlands, Germany, Denmark, and Ireland.

‘The company has identified about $20 billion in advanced technology project opportunities in Europe and is working on data centre projects in the Netherlands and Spain. Through Dornan’s complementary services, Turner sees a significant opportunity to expand its presence in Europe with new and existing clients.’

ACS Group and HOCHTIEF CEO Juan Santamaría said: “The acquisition is an important milestone in the implementation of our strategy. Dornan maintains long-term, partnership-based relationships with customers.”

Following the announcement of HOCHTIEF’s H1 results last week Santamaría noted the acquisition of a rapidly growing advanced-tech engineering company will accelerate Turner’s strategy of expanding its presence in the European data center, biopharma/life sciences and industrial markets.

The H1 release by HOCHTIEF also noted Dornan has a complementary business model and a similar risk approach to Turner and also shares many of the direct relationships with blue chips and hyperscalers.

“Dornan brings incredible strength to Turner and is an important part of Turner’s strategy to serve clients wherever their needs are,” said Peter Davoren, President and Chief Executive, Turner Construction Company.

HOCHTIEF Group sales of €14.7 billion show a 7% increase year on year. HOCHTIEF’s operational net profit rose by 11% to €301 million. Dornan’s 1,000 direct employees will deliver approximately €700 million of sales in 2024. Dornan’s backlog of work is approximately €1.1 billion.

“Our employees and clients will benefit greatly as Dornan joins the Turner family of businesses,” said Brian Acheson, Chief Executive Officer, Dornan.

Acheson continued, “Our clients will continue to enjoy the same level of superior service as we deliver complex technical projects within time and on budget. They will also benefit from the increased scale of Dornan as part of a combined group with over $18 billion of turnover. Similarly, our employees will find increased opportunity provided by Turner to grow Dornan. I am genuinely excited and really looking forward to our future together.”

The current shareholders are part of the key management team of Dornan and will all stay in their positions post transaction.

ACS Group also announced today that the decision to integrate the Group’s Engineering and Construction activities in North America through the creation of a new entity that will bring together the subsidiaries of Dragados and Hochtief in the region.

The resulting entity, Flatiron – Dragados, will become the second-largest civil engineering firm in the United States. The company will be managed by Davoren as Chairman (in addition to his current role as Chairman, CEO & President of Turner) and the current CEO of Flatiron, Javier Sevilla, as CEO. The operation aims to simplify the Group’s structure of the civil engineering activity in North America.

In April, ACS Group unveiled its 2024-2026 Strategic Plan to be able to achieve between €850 million and €1 billion of attributable profit by 2026. The Strategic Plan will allow it to consolidate its business model, which combines profitability through dividends and growth, cohesive and integrated, capable of meeting the demand for both new-generation infrastructures and those in which ACS is already a leader.

Santamaría told investors that the new Strategic Plan aims to consolidate the Group’s leadership in the high-growth markets in which it operates, and continue minimizing activity-related risks through a collaborative business model focused on high-value-added projects.

Additionally, ACS will focus on maintaining profitable growth through active cash and balance sheet management that allows capital allocation to supports diversification, simplification, and growth across all companies within the Group engaged in the development of high-tech infrastructures.

Between 2024 and 2030, the Group could invest up to €1.8 billion in creating a portfolio of industrial and transport infrastructures.

The company will also invest up to €4 billion by 2030 to develop and operate infrastructure in new generation sectors with a valuation of the company’s stake of €9 billion.

• On the one hand, the Group plans to invest up to €2 billion to participate in the creation of a portfolio of data centers and infrastructures related to artificial intelligence and 5G, with a target of 1GW data centers by 2030. The value of the company’s stake in this segment could scale to €5bn by 2030.
• On the other hand, the Group has set a target of around €1.5 billion to participate in the development of transmission lines and photovoltaic and wind infrastructures that could have a capacity of 5GW. The value of the company’s participation in these infrastructures could reach 3 billion by 2030.
• As part of its commitment to energy transition, ACS also plans to invest in green hydrogen and the creation of battery recycling plants.
• The company will also promote the development of a sustainable mobility infrastructure platform, an area in which it could invest €360 million, and whose share could reach a value of €1 billion by 2030.
• Furthermore, the Group will accelerate the business of obtaining critical minerals like lithium to advance the energy transition.

ACS estimates that growth in the markets where it is operating and the development of new platforms will allow the company to double its value, which is currently estimated at €14 billion, above the Group’s market capitalization.

The Strategic Plan deepens the operational integration and simplification of the Group. In this regard, ACS has adopted a new organizational structure, aligned with its management model, which will provide a clearer view of ACS’s growth vectors and contribute to optimal capital allocation. As of 2024, all company activities will be organized as follows:

• Integral Solutions, with two main companies: Turner in America and Cimic in Asia Pacific.
• Infrastructure Investments, which will include Abertis and greenfield infrastructure development companies such as Iridium, Hochtief PPP Solutions, and Pacific Partnerships.
• Engineering and Construction, which will integrate Dragados and its subsidiaries, as well as Flatiron and Hochtief Europe.

Over the last 20 years ACS Group has had a significant role in delivering Ireland’s infrastructure including the motorway network (M1 Dundalk Western Bypass, M11 Gorey to Enniscorthy, M7/M8 Portlaoise – Midlink, N25 New Ross Bypass, N25 Waterford Bypass) and the Great Island Power Station in Wexford. While Hochtief invested in Ireland’s first social infrastructure PPPs including the Pilot Schools PPP bundle and the MTU Cork School of Music.

The expansion of ACS Group’s activities in Ireland through Turner’s investment in Doran represents a landmark for the Irish construction and engineering sector and a key endorsement of the project delivery expertise available in Ireland to deliver the key global emerging infrastructure sectors.

Digital, advanced technology, industrial, transport, and energy sectors are increasingly intertwined for sustainable development.

The new base for ACS Group in Cork also demonstrates the immense economic opportunities for Ireland that could be gained by a holistic approach to developing a leading infrastructure delivery industry.

Providing visibility on the pipeline of infrastructure, energy, and industrial projects Ireland needs will entice the world’s biggest contractors, and their supply chain, to invest in Ireland and partner with Ireland’s world-class indigenous engineering and infrastructure delivery sector.

The European Infrastructure Conference 2024 will take place in Dublin on November 14^th and the BioPharma & Life Sciences Connected Live 2025 will return to Cork on January 23^rd.

For more information, click here: https://www.prempub.com/events/.