Quanta's Subsidiary Sells Howard Stake

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Quanta Capital Solutions, Inc, a wholly owned subsidiary of Quanta Services Inc. (PWR) completed the divestment of its entire equity stake in Howard Midstream Energy Partners, LLC to certain affiliated investment funds managed by Alinda Capital Partners.

The deal was an all cash transaction worth $221 million, resulting in a pre-tax gain of about $113 million or 32 cents per share to Quanta in the fourth quarter of 2013. The net proceeds (after tax) from the sale are expected to be approximately $175 million. Quanta plans to use the proceeds of this transaction to support its ongoing strategic growth, which include acquisitions and investments.

Quanta Capital is a wholly owned subsidiary of Quanta Services. It is the investment arm of Quanta Services. It structures, makes and manages investments that enhance Quanta’s success in its core business Engineering, Procurement and Construction (:EPC) services, while assisting clients in the achievement of their project investment objectives.

On Dec 6, Quanta Services announced a three-year $500 million share repurchase program, thereby reinforcing the fact that the company is committed to its long-term strategy of returning cash to shareholders. This apart, on Oct 30, Quanta Services increased its credit limit to $1.3 billion from $700 million, with an amendment to its Senior Secured revolving credit facility. The increase in its credit capability was primarily to lower its costs and expand its borrowing capabilities.

The series of transactions to generate additional cash while returning the excess cash to shareholders emphasize the fact that the company is probably looking at some strategic acquisitions and at the same time retaining investor confidence.

Currently, Quanta carries a Zacks Rank #3 (Hold). However, some better-ranked energy and utility stocks include VSE Corp. (VSEC), AO Smith Corp. (AOS) and EnerSys (ENS). All these carry a Zacks Rank #1 (Strong Buy).

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