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News/May 30, 2017

Analysis: What Vulcan’s purchase of Aggregates USA means

Vulcan Materials Co.‘s acquisition of Aggregates USA LLC represents the largest construction materials-related deal of the year – by far.

The $900 million acquisition will reportedly add 31 facilities across five Southeastern states to Vulcan’s 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. They’re 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 market’s 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, it’s an owner who doesn’t want to own such an asset forever. That’s 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.”

While the Aggregates USA acquisition strengthens Vulcan in the Southeast, Vulcan was active on the mergers-and-acquisitions front this year ahead of this latest deal.

Vulcan acquired the asphalt division, construction division and Monterey Sand business from Tennessee-based LoJac Holdings Corp. near the start of 2017. Additionally, they acquired Shamrock Materials earlier this year, providing Vulcan with concrete, rock, and sand and gravel assets in California.

These transactions reflect Vulcan’s interests in growth via acquisition and in diversifying, according to Reddin.

“These deals shows Vulcan’s interest in different types of businesses,” he says. “These recent deals show that they are embracing geographic diversification, and a willingness to vertically integrate where appropriate.”


This article was originally published May 26, 2017 on Pit & Quarry.

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