Morrison Knudsen Explores Merger Struggling Company Talks With Dennis Washington

Financially beleaguered Morrison Knudsen Corp. confirmed on Monday that it is in merger discussions with a company controlled by Montana business magnate Dennis Washington. But no agreement has been reached, a company spokesman said.

Spokesman Brent Brandon said that whether there is a merger with Washington Construction Group Inc. or not, Morrison Knudsen will still recapitalize under a debt-for-equity swap that will virtually wipe out any value of its common stock.

Because of the uncertainty to shareholders, Brandon said trading in the stock of the one-time international construction and engineering giant was suspended.

“We have been in close contact with the exchange throughout the day,” Brandon said.

The statement on Monday identified the party involved in the acquisition talks Brandon acknowledged were under way last week.

Last month, the 84-year-old company announced it was pushing ahead with a plan to swap all its equity for the estimated $350 million in debt owed to scores of creditors. Shareholders would be given warrants to buy new stock in the company in the future at a set price that would be higher than the market rate for at least some time.

That would still be the plan if a merger was struck with Washington Construction Group. The creditors as new owners of Morrison Knudsen would deal with Washington Construction after the debt for equity swap was completed.

Corporate officials have said the company is on the verge of a return to profitability after shedding the non-core businesses that former Chairman William Agee got it into. It was the hundreds of millions of dollars of red ink run up by those operations that resulted in Agee being summarily fired 15 months ago.

The Wall Street Journal reported that Washington wanted to name the merged company Morrison Knudsen to take advantage of its worldwide recognition. The deal would expand his Missoula company, which has $228 million in annual revenues, into a $2.2 billion enterprise that could compete with the other construction giants.

Forbes Magazine estimated Washington’s wealth at $800 million last fall.