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Great Lakes D&D Acquires L.W. Matteson, Inc.

Great Lakes Dredge & Dock Corporation announced on January 3 that it had acquired the assets of L.W. Matteson, Inc. of Burlington, Iowa for $45 million. The acquisition will be funded with $37.5 million in cash and a seller note of $7.5 million.

The acquisition was finalized on December 31, 2010.
L.W. Matteson, Inc. has one of the largest fleets of specialized portable dredging and earthmoving equipment on the inland river system. With expertise in dredging, marine construction, environmental and habitat restoration, Matteson is a highly respected contractor serving the upper Midwest, and the Mississippi river system. Great Lakes believes by combining the skills, equipment and resources of the companies, new project opportunities and growth can be achieved.

In addition to the United States Army Corps of Engineers, L.W. Matteson serves many state and local governments and private concerns. Services provided by Matteson include river and lake maintenance dredging, inland levee construction and repair, and environmental and habitat restoration. In addition to long standing relationships with state departments of transportation, the department of natural resources, and numerous prime contractors and engineering firms, L.W. Matteson was named the Outstanding Contractor of the Year in 2004 and 2006 by United States Army Corps of Engineers St. Paul District.

Matteson is expected to generate more than $40 million of revenue with approximate EBITDA margins between 32 and 36 percent for calendar year 2010. In 2011, the Matteson acquisition is expected to add between $35 million and $40 million to Great Lakes’ revenue with EBITDA margins in the mid-to-high 20 percent range. The Matteson transaction will add approximately $25 million to Great Lakes’ year-end 2010 backlog.

Jon Berger, GLDD CEO, stated “We are very excited about the Matteson acquisition. It fits well into our strategy of growing the company through opportunities that are complementary to our skill sets. We believe this acquisition provides us the expertise and assets to perform on projects in the rivers, environmental lake dredging and levee repair markets. We expect to see continued strong and growing demand for each of these segments. River dredging is an area that we have had experience in since the early 1990s, and we look forward to expanding our reach.”

Bruce Biemeck, president and CFO, said “We believe this acquisition is a logical extension of our dredging market leadership, by increasing our geographic reach while expanding our dredging related services to include environmental dredging and levee construction and repair. We are looking forward to taking a leadership position in these new markets, where we see significant growth in the near future.

“We are impressed with the Matteson’s business, which was founded by Lawrence W. Matteson and operated by Mr. Matteson and his son Larry. Their operating methods and innovation have been the basis for building a company that is respected in each market it serves. We are pleased to be associated with the Mattesons and look forward to working with the team to build on the Matteson’s established legacy of outstanding performance and customer satisfaction.”

CONFERENCE CALL
In a telephone press conference on January 4, Deb Wensel, Berger and Biemeck fielded calls from investors, financial institutions and reporters regarding the outlook following the acquisition.

The company will do business as “L.W. Matteson, a Division of Great Lakes Dredge & Dock Company.” Founder Lawrence Matteson will continue on a part time basis to support the operation and growth of the company. Larry Matteson and John Nieman will be the key managers. Larry Matteson will have responsibility for the equipment and Nieman will manage bidding and related issues.

There will be some cross-over of dredges; the small Great Lakes dredges America and Ponchartrain, which work seasonally in the lower Mississippi, will possibly be used on Matteson Division projects.

For the time being, the Matteson dredges will retain their branding, with no immediate plans to re-paint them Great Lakes red.

Asked what the Mattesons’ motivation was for selling their company, Berger replied that the company had grown in the past 10 years, and wanted to grow more; that the company has a loyal group of employees who were willing to look at opportunities, and that the Mattesons decided it would be helpful to be associated with Great Lakes D&D.

Great Lakes is looking to grow the business, and expects it to be a $100 million operation in several years’ time. They will be looking at expanding Matteson’s existing markets, especially in environmental dredging - specifically ash pond cleanup. With 44 ash ponds in the U.S. on the Superfund roster, those dredging contracts, for which Matteson’s portable equipment could be used, are a high-dollar market.

Matteson is equipped to do levee work, and it has been estimated that refurbishing the levees on the U.S. inland river system will take $50 billion. In addition to repair of ongoing damage, such as happened in recent flooding, those projects would be a viable growth market for the Matteson division.

Cleanup projects in the Western Canadian oil sands projects are a massive prospect, and Great Lakes is looking into that market for the portable Matteson equipment.
Great Lakes can aid the Matteson organization with RFP’s, submitting bids and managing projects, which will be another growth area. Matteson’s job projections of $80 million to $100 million can be expanded in their usual field of business with additional Great Lakes manpower and expertise.

Throughout the conference call, the officials repeatedly praised the financial position of L.W. Matteson, and the good condition of the dredges and other marine equipment. Since it works only in fresh water and has been well maintained, the equipment is a good investment.

Asked about the status of the Harbor Maintenance Trust Fund, Biemeck said, “We built a great coalition (to bring about passage of the legislation).

“We are optimistic that it will get passed, even if there are Republicans in Congress who think we shouldn’t be spending anything,” he said.

“Even if we had no bill in 2010, it was a successful year. Bill Hanson did a nice job of building the coalition to this point,” he said.

Finally, asked if they are looking at other companies to acquire, Biemeck and Berger both answered “yes,” but that there is no other announcement pending.

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