Hill International, the Philadelphia-based project-management company that represents the Pennsylvania Turnpike and clients around the world that hire building contractors, says it has agreed to sell its construction claims group, with 960 staff, to U.K.-based private-equity investor Bridgepoint Development Capital for $147 million in cash.
Hill will make significant cuts to its "corporate overhead structure" to be as lean as possible after the sale, which it hopes to close by February, CEO David Richter told investors in a conference call.
Hill, with about 4,400 staff in 40 countries, employs around 180 at its Center City headquarters, plus 70 elsewhere in the region. Claims unit bosses "will be moving out and getting their own space" in the Philadelphia area once Bridgepoint takes over; fewer management support workers will be needed to run the smaller, less-complex company that remains, Richter said.
Hill shares, which have traded mostly in the $3 to $6 range since 2008, rose as much as 18 percent, up to $4.28 on Tuesday, before settling at $4.10 (up 12 percent) at the market close.
Richter called that boost "underwhelming," noting that the sale price was equal to almost 80 percent of the company's share value, for a business that was only about a quarter of Hill.
Hill expects to collect the $147 million sale price tax-free, because it has enough past losses to offset profits. Richter said Hill would use the cash to pay down and refinance its debt, which had left the firm "overextended." That will reduce payments to bankers and other investors, who last year charged rates topping 9 percent, costing Hill $13.5 million.
Richter also said his slimmer company will concentrate more on U.S. operations and on acquiring other project-management firms, especially in the U.S. With business slowing in the Middle East and Latin America, the CEO hopes to boost the proportion of U.S. sales above 40 percent, from today's 30 percent.
Bridgepoint will run the claims group as a stand-alone company, Hill spokesman John Paolin said. Group president Frederic Z. Samelian will stay in charge as of the deal closing date, set for February.
Bridgepoint partner Alan Payne said his firm, which manages $15 billion, mostly in Europe, plans to improve claims operations, buy other firms, and add services.
The construction claims unit provides expert testimony in court cases, arbitration and other disputes over construction problems. In the last year, Hill says the claims group collected $163 million, about 26 percent of Hill's total sales, and collected $11 million in profits, on an operating basis.
Construction Claims "was the original business" that longtime CEO Irvin Richter used to build the company since the 1970s, Irvin's son, David Richter, said.
"We know that each of us will be in a better position as independent and separate companies" that should find it easier to win new business and raise capital, Richter said.
By selling the claims business, Richter says, Hill will eliminate conflicts of interest that kept clients from hiring the company as both a construction project manager and an arbiter or expert witness in construction disputes.
The claims business is a global leader highly regarded by its clients, Bridgepoint partner Payne said.