A few weeks into the merger, the business is running smoothly, with few changes, other than moving from the New York Stock Exchange to the London Stock Exchange, reports Bruce Robinson, president and CEO of Balfour Beatty Communities. The firm remains in its home base here and has retained its entire executive management team and existing corporate and project-level military housing employees.
Yet that doesn't mean things will necessarily remain status quo. For one, the transaction gave Balfour Beatty an entrée into the military housing privatization business in the US. The company had a successful privatization operation in the UK and had worked on several defense-related projects stateside, but was unable to make a move into the military housing sector, explains Robinson.
Enter GMH Military Housing, which initially caught Balfour Beatty's eye when it worked with a company the firm acquired a year ago. "We were actually not soliciting offers when Balfour Beatty approached us," says the executive, adding that the firm ultimately determined a transaction would be in the best interest of shareholders. "Balfour Beatty has a substantial amount of projects ranging from roads and hospitals to schools and airports. However, they have been attempting to get a foothold in the US and have not recognized the same degree of success. By acquiring GMH, they get a platform that would give them an immediate foothold in the US, and allows them to take that platform and continue to grow further."
Balfour Beatty Communities joins several other groups under the Balfour Beatty umbrella, including business focused on building, building management and services; civil and specialist engineering and services; rail engineering and services; and other investment and development activities. Balfour Beatty has been involved in several projects within the defense sector in the US, including the 9/11 Memorial at the Pentagon; healthcare facilities for the US Army Corps of Engineers and the Department of Veterans Affairs; the US Capitol Visitor Center; multiple National Archives and Records Administration facilities; and facilities for the General Services Administration.Balfour Beatty Communities accounts for about 1,000 of Balfour Beatty plc's global roster of 35,000 employees. Yet perhaps one of the biggest components, says Robinson, is financial: for the privatization arm, which generates annual revenues of about $28.6 million, the parent company's $14-billion revenue stream adds some heft.
"I don't know that it gives us an upper hand, but it allows us to play on a level playing field, since most of the people that were pursing this have fairly deep pockets," says the executive. "By being combined with a substantial player that not only has the money but also the expertise, we think we bring a unique set of characteristics to any kind of privatization project.
"The whole privatization trend is interesting," Robinson continues. "Every day you pick up the newspaper and see that another company has raised $1 billion, $2 billion or $5 billion for this sector. It has become a very hot-button area. As states and governments no longer have the funds to take care of their infrastructure, the question becomes how to pay to repair or replace a lot of our crumbling systems. We are excited that we are now part of a larger company that looks at this as a great opportunity to be part of this new industry that's really blossoming."
While he would not discuss the specifics of any particular projects the firm is working on, Robinson relates that there are significant growth opportunities for Balfour Beatty Communities, not only in the privatization arena, but elsewhere as well. "There is still a fair amount of family housing projects to be privatized, and we believe there's also going to be a large initiative to privatize all the unaccompanied housing, or barracks, for all the services. We're still bullish on that area," he says. "We also believe that there are other opportunities in the privatization arena that will allow us to get some synergies with what Balfour Beatty has done in the UK. We're looking at areas where we may be able to complement each other, in such areas as road, schools, hospitals, utilities and the like."Through joint ventures with the Department of Defense, Balfour Beatty Communities currently has interests in a dozen housing projects on 37 military bases, worth some $3 billion, as well as one unaccompanied personnel housing project. The firm is in negotiations for four more projects on six military bases that would result in about 6,000 housing units. Those transactions are expected to close in the second and third quarters of this year. Also in discussion is a deal for an unaccompanied personnel housing project that is slated to close in the second half.
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