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Dive Brief:
- Two European construction powerhouses announced Tuesday that they are merging parts of their North American operations to form a US-based infrastructure behemoth.
- Germany-based Hochtief and Madrid-based ACS Group announced the combination of Broomfield operations, Colorado-based Flatiron and Spain-based Dragados’ North American operations to create what would be the second largest domestic heavy contractor in the US, behind only Kiewit. Hochtief and ACS own Flatiron and Dragados, respectively.
- Peter Davoren, chief executive of New York-based Turner Construction, which announced the acquisition of Ireland-based Dornan Engineering last week, will serve as chairman of the combined company. Davoren will continue in his role at Hochtief-owned Turner. Flatiron CEO Javier Sevilla will be CEO of the new firm, called Flatiron Dragados.
Diving knowledge:
The move forges even closer links between the European construction market and US infrastructure builds at a time when US projects have been booming despite a higher interest rate environment. In contrast, European construction activity has languished while the economies of both the UK and Germany have struggled.
The ties between the respective companies in the deal have been intertwined for a long time. For example, ACS is the majority owner of Hochtief, which in addition to Flatiron also owns Turner. ACS and Hochtief are listed companies on European stock exchanges.
Under the terms of the deal, ACS will own 61.8% of Flatiron Dragados, and Hochtief will control the remaining 38.2%. The combined business has a portfolio of $17.2 billion, 40% of which is partnership contracts, and had cumulative revenue of $6.1 billion by 2023, according to a press release announcing the deal.
That would make it the 21st largest commercial construction company in the US by revenue, according to the latest ENR 400 list, and the second largest domestic heavy contractor. Kiewit topped this category in 2023 with revenue of $6.01 billion.
Hochtief and ACS did not say whether cash was involved in the deal. Although the combination has been approved by the boards of directors of Hochtief and ACS, the deal will be finalized by the end of the year, according to Chris McFadden, a spokesman for Turner. The location of the new company’s headquarters was not disclosed.
The combined entity, which will it encompasses Flatiron, as well as Dragados USA and Dragados Canada, according to a video describing the deal, will have operations in 24 US states and eight Canadian provinces. The video characterized the new company as “North America’s premier civil engineering firm.”
“Bringing Flatiron and Dragados together creates a strong platform for organic growth in the North
America,” Hochtief CEO Juan Santamaría said in the statement. “The employees of Flatiron and Dragados North America have a long history of working together.”
For example, the companies joined in the 1.2 billion dollars Harbor Bridge Project in Corpus Christi, Texas. While a dispute with Texas DOT caused a work stoppage in 2022, that claim was resolved and the project is currently scheduled for completion in 2025, according to the project’s website.
Hochtief said the deal will create synergies and economies of scale, with a consistent approach to operations, including bidding processes, procurement strategies and risk management.
