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Dycom to Buy Quanta's Telecom Biz

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Dycom Industries, Inc. (DY) announced the signing of an agreement with Quanta Services, Inc. (PWR) to acquire all the domestic telecommunications infrastructure services units of Quanta for approximately $275 million. The deal is expected to be closed by December 31, 2012, subject to regulatory approvals.

Headquartered in Palm Beach Gardens, Florida, Dycom Industries is a leading provider of specialty contracting services. Its offerings include engineering, construction, maintenance and installation services to telecommunications providers, underground facility locating services to various utilities and other construction and maintenance services to electric and gas utilities and others.

The acquisition is a strategic fit and perfectly complements Dycom’s existing business, as the to-be-acquired units offer contracting services like engineering, construction, maintenance and installation to telecom companies and other construction and maintenance services to electric and gas utilities. These units are expected to generate revenues of $400 million to $450 million in calendar year 2013.

This acquisition is expected to strengthen Dycom’s customer base, geographic presence, and technical service offerings. Further, the acquisition significantly enhances Dycom’s rural telecommunications engineering and construction capacities, provides additional construction resources for wireless carriers and boosts the company’s already-robust broadband construction capabilities.

Given the recent industry trend of growing investments from the customers and a very attractive financing environment, Dycom believes that this is the opportune moment to increase its scale of operations. 

Quanta’s telecom subsidiaries currently operate in 49 states, serving over 300 individual customers. Its principal business facilities are primarily located in Arizona, California, Florida, Georgia, Minnesota, New York, Pennsylvania and Washington. Revenue generated over the past 12 months was about $535 million.

Excluding one-time transaction and integration costs of approximately $12 million to $15 million, the acquisition is expected to be accretive to Dycom’s earnings by 5 cents to 10 cents per share annually, after non-cash amortization expense.

Quanta Services Inc. is a leading national provider of specialty contracting services, and is one of the largest contractors serving the transmission and distribution sector of the North American electric utility industry. The company primarily competes with Fluor Corporation (FLR) and currently holds a Zacks #2 Rank, implying a short-term (1-3 months) Buy rating on the stock. 

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