Canadian building-interior manufacturer DIRTT Environmental Solutions Ltd has abandoned an effort to sell itself after soliciting offers from private equity firms and other companies, people familiar with the matter said.
Private equity firms seeking to raise debt financing for the acquisition have struggled to convince banks to finance a business that is vulnerable to changes in the cyclical construction industry, the sources said this week.
The sources asked not to be identified because the sale process was confidential. A representative for DIRTT, which stands for “doing it right this time,” did not respond to a request for comment.
DIRTT’s custom prefabricated installations can be found in the headquarters of companies like Apple Inc and Alphabet Inc’s Google.
A U.S. Commerce Department report showed construction spending unexpectedly fell in March as a slump in homebuilding and renovations led to the biggest drop in investment in private construction projects in more than seven years.
DIRTT also entertained offers for a private investment in public equity (PIPE) transaction, that would give a private equity firm a minority stake in the company but choose not to pursue one in the end, the sources added.
DIRTT, which has a market capitalization of $553.38 million (US$425.45 million), had also been a target of a U.S.-based activist investor Iron Compass, that threatened a proxy contest earlier this year.
The company announced a settlement with Iron Compass in April, and agreed to add two board directors recommended by the activist hedge fund. A representative for Iron Compass could not be reached for comment.
In January, the company’s co-founder Mogens Smed stepped aside as chief executive and was named executive chairman. DIRTT’s board formed a special committee to explore a sale, as Smed wanted to participate in the deal by partnering with a potential acquirer, according to the sources.
In the first quarter of the year through March 31, the company’s revenue rose 24.1 percent to $80.7 million compared to $65 million a year earlier. Its net income rose to $3.56 million, after a net loss of $1.3 million a year earlier.
Founded in 2004, the Calgary, Alberta-based company has a three-dimensional design platform that helps customers make custom designs. It went public in 2013 on the Toronto Stock Exchange.
Update: DIRTT confirmed it was no longer in deal talks after the Reuters report.
In a statement, DIRTT said its board of directors had formed a special committee and hired financial and legal advisors to consider “strategic alternatives” following an “inbound non-binding transaction proposal” earlier this year.
“It was determined that no strategic transaction should be pursued at the present time,” DIRTT said.
(Reporting by Greg Roumeliotis and Liana B. Baker in New York; Editing by Bernadette Baum and Stephen Coates)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)