Mr. Joe Lambert reports

NORTH AMERICAN CONSTRUCTION GROUP ANNOUNCES TRANSFORMATIVE ACQUISITION OF MACKELLAR GROUP, A LEADING PRIVATE AUSTRALIAN HEAVY EQUIPMENT SOLUTIONS PROVIDER

North American Construction Group Ltd. has entered into a definitive purchase and sale agreement to acquire MacKellar Group for an estimated $395-million. MacKellar Group, with its heavy construction equipment fleet, is an Australia-based provider of heavy earthworks solutions to the mining and civil sectors, with a strong reputation derived from decades of reliable performance. The transaction will significantly expand North American Construction's capability and allow the company to serve a highly valuable and diversified base of customers globally.

The transaction emerged through continued dialogue with MacKellar over the past two years, following North American Construction's entry into Australia through the acquisition of DGI Trading Pty. Ltd. in 2021. The acquisition of MacKellar is highly complementary to, and a natural strategic fit with, North American Construction given shared cultural alignment, focus on safety and operational similarities. MacKellar will continue to operate and execute on its growth strategy while delivering on its commitment of service to all its customers and partners.

"NACG has built a strong relationship with MacKellar over the past two-plus years. Given the operational and cultural similarities that our companies share, this acquisition is a rare and attractive opportunity," said Joe Lambert, chief executive officer of North American Construction. "Over the years, we have worked extremely hard to be part of the solution to help lower the operating costs of our customers through safe, efficient operation and maintenance of our equipment fleet. We are excited about partnering with MacKellar to serve our expanded customer base with the same innovations at a time when commodity producers are striving to maximize production and efficiency. I want to welcome the MacKellar team to the NACG family. We are extremely proud to be sharing in what we believe will be a bright future together."

"Joining NACG offers a significant opportunity for both companies to share best practices and execute on our growth strategy. Our shared culture, highly skilled maintenance and operations teams, and now global operations will position us as a leader in heavy equipment fleet, allowing us to better serve customers across Australia," said Duncan MacKellar, chairman of MacKellar Group.

Strategic highlights:

• Combined business with significant global reach and diversified customer base: MacKellar provides the opportunity to expand the company's geographic and operational presence in Australia while adding a high-quality investment-grade customer base. The transaction provides diversification with no single end market contributing more than approximately a third of adjusted earnings before interest and tax.
• Shared core values and culture: MacKellar shares North American Construction's values and is committed to hands-on management, continuous drive to be the low-cost provider, a focus on building strong partnerships with customers, and maintaining operating and safety excellence.
• Turnkey operations with highly valuable asset base: MacKellar Group adds approximately 450 mobile heavy equipment assets; 1,000 employees, including over 375 maintenance personnel; and 15 operating projects across a variety of service offerings, including contract mining, civil earthworks, dry and maintained equipment rentals, and component rebuilds. Its asset base is composed of a well-maintained fleet operating at effective utilization levels.
• Prudent approach to the transaction minimizes execution risk: Continuous dialogue and in-person operational field reviews by both parties have allowed for the company to ensure there is a strong cultural fit and alignment between the two organizations. This alignment is also reflected in the transaction structure with a significant portion of the consideration being deferred.
• Robust growth prospects with strong backlog: Operations in Western Australia and Queensland serve as a growth pillar given the large and diverse resource markets combined with a mining-friendly jurisdiction. The combined company is expected to have over $4.0-billion in contractual backlog by Dec. 31, 2023, which will be the foundation to drive significant growth.

"The transaction represents a major milestone for NACG and adds significant scale to our business. Both NACG and MacKellar are leaders with strong reputation, culture and commitment to safety. This partnership will accelerate our combined growth and allow us to better serve our customers on a global scale," said Martin Ferron, chairman of the board of North American Construction.

Financial highlights of the transaction:

• The total estimated consideration of $395-million: (i) represents less than 2.75 times of expected EBITDA (earnings before interest, taxes, depreciation and amortization) in 2024; (ii) is estimated to be less than the book value of MacKellar's assets; and (iii) is expected to be over 50 per cent accretive based on incremental earnings per share.
• The transaction is fully financed by bank-secured and vendor-provided debt financing.

The transaction includes an upfront payment of $75-million (Australian), which will be financed by the upsized revolving credit facility described below. In addition, liquidity from the credit facility and assumed equipment financing of MacKellar are estimated to provide $200-million of the total consideration. The rest of the consideration is addressed through an earnout and deferred payment mechanism payable to the vendors over four years, with the earnout constituting approximately 70 per cent of this amount.

2023 outlook and 2024 incremental impacts

Based on consistent equipment utilization and the contractual backlog in place, management has provided ranges of certain financial measures for 2023 and expected incremental impacts of the MacKellar Group to the year ended Dec. 31, 2024. Upon close of the transaction, management intends to provide a 2024 outlook including guidance typically provided with regard to capital allocation.

Underwritten financing

The company currently has in place a $300-million revolving credit facility with a syndicate of financial institutions, which permits the incurrence of an additional $175-million of secured equipment financing with third parties. Concurrent with the announcement of the transaction, the company has entered into a commitment letter for an underwritten financing from National Bank of Canada, as sole lead arranger and sole bookrunner, to amend and restate the current facility to a senior revolving credit facility in the maximum amount of $450-million. The amended and upsized credit facility will permit the incurrence of an additional $300-million of secured equipment financing from third parties.

Conditions to the acquisition

The transaction is not subject to any financing conditions and is expected to close in the fourth quarter of 2023 subject to obtaining contractual consents and the satisfaction of other customary closing conditions.

Advisers

National Bank Financial is acting as exclusive financial adviser to North American Construction on the transaction. Fasken Martineau DuMoulin LLP is acting as a legal adviser, and Corrs Chambers Westgarth is acting as local Australian counsel to North American Construction.

Conference call and webcast

Management will hold a conference call and webcast to discuss the transaction on Thursday, July 27, 2023, at 6 a.m. Mountain Time (8 a.m. Eastern Time).

The call will be available by dialling the following.

Toll-free:  1-888-886-7786

Conference ID:  47287641

A replay will be available through Sept. 1, 2023, by dialling the following.

Toll-free:  1-877-674-7070

Conference ID:  47287641

Playback passcode:  287641

A live presentation and webcast will be available.

A replay will be available until Sept. 1, 2023. A copy of the investor presentation is also available on the North American Construction website.

About North American Construction Group Ltd.

North American Construction is a premier provider of heavy civil construction and mining services in Canada, the United States and Australia. For 70 years, North American Construction has provided services to the mining, resource and infrastructure construction markets.

About MacKellar Group

Established in 1966 based on humble family values, MacKellar has earned an enviable reputation in the industry for performance and reliability. MacKellar specializes in heavy earthmoving equipment solutions and has a proud history of working on both mining and civil earthwork projects around Australia.

We seek Safe Harbor.