May 17, 2010 / 6:17 AM / in 8 years

UPDATE 3-Churchill Corp to buy Seacliff for C$380 mln

* Offers C$17.14 per Seacliff share, a premium of 18 pct

* Says deal to immediately add to Churchill’s EPS

* Churchill says doesn’t plan to pay dividend in near term

* Seacliff shares jump 17 pct to touch year high (Adds details, analysts’ comments and stock movement)

By Koustav Samanta

BANGALORE, May 17 (Reuters) - Canadian construction company Churchill Corp CUQ.TO said it will buy Seacliff Construction Corp SDC.TO for about C$380 million ($371 million) in cash plus the assumption of about C$10 million of debt to expand in new markets.

The C$17.14 per-share offer, which is expected to immediately add to Churchill’s earnings per share, represents an 18 percent premium to Seacliff’s Friday closing price of C$14.55.

“It is a very meaningful deal between two great companies, merging into becoming a much bigger one,” National Bank Financial analyst Benoit Caron told Reuters, adding that the transaction will provide better scope and reach for the companies. Both Churchill and Seacliff operate with a similar business model but with little overlap, the two companies said in a statement.

Analyst Caron said the combination of the companies will help them with a lot of cost savings. He has “outperform” ratings on both Churchill and Seacliff stocks.

Churchill has five subsidiary companies that provide commercial and industrial construction, industrial insulation and electrical work and maintenance services in western Canada.

The deal provides opportunity to create a more diversified electrical services group, the companies said.

“Churchill has an industrial electrical provision. Seacliff has more of an institutional or private sector electrical (business). So, merging the companies now makes them a major player on electrical contracting for a whole range of electrical services,” Paradigm Capital analyst Corey Hammill said.

Hammill, who has “buy” ratings on both the stocks, said Seacliff and Churchill are on “a great growth path” and merging the companies together makes even a stronger combined company.

Churchill expects to achieve C$5 million to C$7 million in annual pretax cost synergies upon the expected completion of the integration in fiscal 2011.

Related non-recurring transaction and integration costs are estimated at about C$12 million to C$15 million, it said.

With the combination of two companies, Churchill said it will employ about 3,304 people during peak construction, consisting of about 612 full-time salaried employees and 2,692 hourly employees.

Churchill said it did not plan to pay a dividend in the near term.

Vancouver-based Seacliff operates in 22 locations in British Columbia, Alberta, Saskatchewan and Manitoba, as well as two locations in northwestern Ontario.

Seacliff shares were up 17 percent at C$16.98, while those of Churchill were down 3 percent at C$18.35 Monday morning on the Toronto Stock Exchange. Seacliff shares touched a year high of C$17.05 earlier in the session. ($1=1.024 Canadian Dollar) (Reporting by Shrutika Verma and Koustav Samanta in Bangalore; Editing by Greg Mahlich, Vinu Pilakkott and Maju Samuel)

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