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Aegion Sells 50% Stake in German JV

Zacks Equity Research

Aegion Corporation (AEGN) has announced the sale of its 50% interest in a German joint venture Insituform Rohrsanierungstechniken GmbH (Insituform-Germany) to Denmark’s Per Aarsleff A/S (Aarsleff) for €14 million ($18.3 million).

Insituform-Germany was jointly owned by Aegion and Aarsleff. Insituform-Germany provides sewer rehabilitation services in Germany and through its subsidiaries it offers the services in Slovakia, Hungary and The Czech Republic. It generated revenues of approximately €72 million ($89 million) in 2012.

Moreover, Aegion entered into a product supply agreement with Insituform-Germany, whereby the latter will purchase at least £2.3 million ($3.6 million) of felt cured-in-place pipe (:CIPP) liners annually from Jun 26, 2013 to Jun 30, 2015.

The divestiture is a wise move as the German CIPP contracting market is highly competitive and fragmented and returns from the joint venture have trailed for a number of years. Aegion had suffered losses of $0.9 million in fiscal 2012 and $0.3 million in the first quarter of 2013 from Insituform-Germany’s operation.

After shedding this underperforming unit, Aegion will be able to focus its resources and efforts on higher return businesses and growth of third-party product sales in Europe. The sale is consistent with Aegion’s strategy to optimize its product and service mix as per the market requirements of individual countries, in turn improving the overall return of its businesses.

With this transaction, Aegion will continue to provide felt CIPP liners to Insituform-Germany until Jun 30, 2015. It also will immediately market Aegion’s glass CIPP liners in Germany, the largest CIPP market in Europe. The transaction is expected to result in a pre-tax gain on sale of investment of approximately $$11-12 million.

Aegion Corporation provides proprietary technologies and services to protect against the corrosion of industrial pipelines and for the rehabilitation and strengthening of water, wastewater, energy and mining piping systems and buildings, bridges, tunnels and waterfront structures.

Aegion currently holds a Zacks Rank #2 (Buy). Other favorable investment options in the construction sector include Dycom Industries Inc. (DY), with a Zacks Rank # 1 (Strong Buy), and EMCOR Group Inc. (EME) and Orion Marine Group, Inc (ORN), carrying a Zacks Rank #2 (Buy).

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