Pit & Quarry, July 2017

UPDATE VULCAN PURCHASING AGGREGATES USA IN DEAL APPROACHING 1B V ulcan Materials Co reached an agreement with SPO Partners to acquire its aggregate business Aggregates USA LLC for 900 million in cash Aggregates USA operates 31 facilities in Georgia Florida South Carolina Tennessee and Virginia according to Vulcan We are pleased to have reached agreement with SPO Partners for these strategic assets which enhance our ability to serve high growth markets throughout the southeastern U S says Tom Hill Vulcans chairman and CEO With the addition of these quarries and related assets Vulcan will be able to capitalize on continuing increases in state highway funding programs in Georgia Florida South Carolina Tennessee and Virginia and on the continued private sector growth across the region The acquisition complements and expands Vulcans service offerings in Georgia with three granite quarries two of which have rail capabilities extending the companys reach into important markets along with 16 rail distribution yards in Georgia South Carolina and Florida In addition the acquisition includes 12 limestone quarries in eastern Tennessee and southwest Virginia Vulcan may divest several quarries in Tennessee to a third party in order to expedite the regulatory approval process the company says The transaction is subject to closing conditions and regulatory provisions under the Hart Scott Rodino Act Vulcan expects the transaction to be accretive to its earnings per share in the first year following the close Also the North Bay Business Journal reports that Vulcan acquired Californias Shamrock Materials as one of its early 2017 acquisitions According to the publication Shamrock gives Vulcan concrete rock and sand and gravel facilities in Sonoma Napa and Martin counties within California The Shamrock acquisition includes construction materials sites in Cotati and San Rafael a sand and gravel outlet in Cloverdale a materials depot and ready mix plants in San Rafael Petaluma Santa Rosa Cloverdale and Napa the North Bay Business Journal reports V ulcan Materials Co s acquisition of Aggregates USA LLC represents the largest construction materialsrelated deal of the year by far The 900 million acquisition will reportedly add 31 facilities across five Southeastern states to Vulcans ever growing portfolio But according to George Reddin the managing director at FMI Capital Advisors Inc the Aggregates USA deal should not necessarily come as a surprise to the aggregate industry It is interesting news but not necessarily surprising says Reddin who specializes in mergers and acquisitions for the construction materials industry The market sentiment is that Aggregates USA had been floating the idea out there for quite some time that they would like to sell Theyre Birmingham Alabama based as well so they fit Vulcan very well And at its size there were only so many people who could acquire it Aggregates USA which formed in 2010 was the aggregate business of SPO Partners a Mill Valley California based investment firm that employs a long term value oriented and concentrated approach to investing in companies in the public and private markets SPO Partners purchased Aggregates USA years ago during the markets downturn Reddin says so the timing was likely right for the firm to move Aggregates USA The goal for most private equity buyers is to exit their investment and provide a return to their LPs in three to five years seven at the outside Reddin says So this particular deal was due When you look at who the owner was its an owner who doesnt want to own such an asset forever Thats the nature of the beast A deal like this one also reflects how far top aggregate producers have come with their balance sheets since the economic downturn Reddin says The publicly traded companies expanded into the crash of 2008 with significant acquisitions often financed with debt he says Post crash many of the publicly traded companies found themselves overleveraged and out of the M A market Over the last eight plus years these companies have worked diligently to reduce their leverage ratios and now find themselves back in the game 40 PIT QUARRY July 2017 pitandquarry com PHOTO COURTESY OF VULCAN MATERIALS CO Analysis What Vulcans purchase of Aggregates USA means Reddin