Stimulus Plan Prompts Pasadena Firm's PickupsMonday, July 6, 2009
With its sixth acquisition of the year last week, Tetra Tech Inc. is showing considerable prowess beyond its forte of engineering consulting.
The Pasadena firm is demonstrating an ability to deploy cash and credit to give it the heft needed to win infrastructure contracts funded by federal stimulus money.
Tetra Tech announced June 30 that it had acquired Diamond Bar engineering firm Bryan A. Stirrat & Associates for an undisclosed amount. BAS has annual revenue of $40 million and provides landfill design, hazardous waste management and other services in California and Arizona.
Though the companies have worked together on landfill remediation programs, including a federal Brownfield redevelopment near Los Angeles, the acquisition boosted Tetra Tech's expertise in the market.
A few weeks earlier, the company acquired three engineering companies, including Tesoro Corp., a Virginia Beach, Va., construction management firm that works primarily for the U.S. Department of Defense. A second specialty acquisition, Mussetter Engineering of Fort Collins, Colo., has expertise in water resources and environmental hydraulics.
In January, the company acquired Haselwood Enterprises Inc., Oakridge, Tenn., nuclear science and engineering company that does work for the U.S. Department of Energy and National Nuclear Security Administration, as well as commercial nuclear companies.
Engineering companies with the broadest range of expertise and deep ties to the federal government will have the best chances of gaining the infrastructure contracts, according to analysts.
"Unless you have relationships with agencies with stimulus money to spend, it's harder to benefit from the stimulus," said analyst Rob Young at Wm. Smith & Co. in Denver. "Tetra Tech has such a good relationship with the federal government that they really stand to benefit."
Discounting tax relief, roughly $154 billion of the $819 billion federal stimulus plan is targeting infrastructure, science and energy projects. Indeed, with the pot of money so large, Tetra Tech, which has tended to avoid debt, deployed a lightly used $300 million credit facility to make its most recent acquisitions.
Chief Executive Dan Batrack said the company, which had net income of $70 million on revenues of $1.3 billion in fiscal 2008, should be able to pay off the debt with its cash flow.
Tetra Tech has been looking for companies that are "market leaders" with "excellent customer relationships" that provide services Tetra Tech doesn't offer, and have clients in regions not served by the company, Batrack said.
"BAS, for example, strengthens our technical capabilities in watershed protection and adds new customers in the Southwest," he said.
Tetra Tech's other two acquisitions this year gave the company its first presence in Canada, the United Kingdom and India. The company in January bought Wardrop Engineering Inc., a diversified Calgary, Canada, firm with annual revenue of $120 million.
Another June acquisition, ACI Engineering of Vancouver, Canada, was merged with Wardrop to provide the expertise needed to connect wind and other alternative energy generators to electrical transmission networks. Batrack expects ACI engineers to assist in U.S. projects.
Tetra Tech shares, which closed at $28.63 on July 1, are up 19 percent from the beginning of the year.