A week after the House of Representatives passed a $300 billion highway bill, the Italian civil construction firm Salini Impregilo has announced it will acquire Lane Industries, a top U.S. highway contractor, in hopes of better accessing the U.S. market. The deal is worth $406 million, and the combined company will have annual sales of around $6.4 billion.
The move is part of continuing efforts by European construction firms to branch out internationally, as contracts in Europe remain in a long-term slowdown. The U.S. currently makes up about 4% of Salini Impregilo’s business, which has much larger slices in Africa (33%) and Latin America (14%), where Salini is one of the contractors on the recently troubled expansion of the Panama Canal.
But the developing world is facing headwinds to infrastructure investment, as sluggish expansion and falling commodity prices slash revenues, and a surging dollar makes borrowing more expensive.
That makes the U.S. construction market look sunny by comparison, and the Lane acquisition will boost Salini Impregilo’s U.S. revenue to 21% of totals. In statements this morning, CEO Pietro Salini made specific reference to the new highway bill as a sign of a bright future for U.S. infrastructure spending—though to anyone familiar with U.S. infrastructure funding, that might sound overly optimistic.
After all, the highway bill came after years of stumbling through short-term fixes, fell short of the funding levels many say are needed, and failed to address structural problems with highway funding. Though nominally a six-year bill, it’s only funded for three.
But according to Michelle Karavias, head of infrastructure research for BMI Research, the U.S.’s persistently dysfunctional infrastructure funding may actually give Salini Impregilo an edge. Karavias says more and more U.S. states are exploring public-private funding models for big projects. These arrangements can include states repaying private investments, or private enterprises getting revenue from eventually operating projects like toll roads or train lines.
It’s a model that is still relatively rare in the U.S., but one that Salini Impregilo has become familiar in the developing world. If such arrangements continue to rise, that would give them an edge.
“This is where European [players] have been the best,” says Karavias, “Because they have the most experience with public-private partnerships.”
Salini Impregilo also has serious capital heft, which could give it the leverage to develop such deals.
Of course, it’s also possible that the highway bill represents a fresh start, and U.S. legislators are actually starting to listen to the Wagnerian chorus issuing persistent, dire warnings about the state of U.S. infrastructure. In that case, renewed funding could be a best-case scenario for both Salini Impregilo, and the U.S. itself.
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