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Public Companies Dip Their Toes Back into the Market

Posted By admin On March 1, 2013 @ 6:00 am In Articles | No Comments

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STOCK REPORT
Sources: New York Stock Exchange, NASDAQ, and Wall Street Journal Market Watch. Currency conversion calculated on 2/4/13.

By George H. Reddin

The merger and acquisition news this past month came from the publicly traded companies as we continue to see balance-sheet management, a focus on core strategic business and markets, and the slow return to the buy-side. Debt has handcuffed the publicly traded companies in the construction materials sector since the collapse of the credit markets in 2008. These companies have been restructuring and reducing debt, divesting of non-core assets, pursuing joint ventures in an effort to rationalize markets, and slowly dipping their toes back into acquisitions. The recent activity speaks to the success of balance-sheet management, as well as an improved outlook for the market by the major players.

 

Recent transactions

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U.S. On-Highway Diesel Fuel Prices
Source: U.S. Energy Information Administration (dollars per gallon, prices include all taxes).

Lafarge is selling six aggregates quarries in Georgia, for a total enterprise value of $160 million, to two yet-to-be disclosed buyers. These assets were considered non-core as Lafarge pursues a strategy of focusing on geographic areas where the company has integrated positions. Additionally, Lafarge and Elementia have agreed to combine their cement assets in Mexico, a move that will significantly strengthen Lafarge’s position in the country. Lafarge will contribute plants at Vito and Tula, which have a total capacity close to 1 million tons per year, and Elementia will contribute a plant it is currently building in central Mexico, with a capacity of 1 million tons per year. Lafarge will hold a 47-percent stake in the new joint venture, and Elementia will hold the remaining 53 percent.

Vulcan Materials Co. sold reclaimed and excess land in California and one small quarry in rural Virginia. Vulcan also sold a percentage of future production at four aggregates quarries in South Carolina to Plum Creek Timber Co., Inc. (PCL), which will pay $75 million in exchange for an estimated 10.5-percent royalty interest in the sale of approximately 144 million tons of production over 25 years. These transactions generated approximately $149 million.

Vulcan also announced that it is acquiring aggregates businesses in Texas and Georgia with the acquisition of two active quarries and additional reserves adjacent to two existing quarries for georgeUntitled-1 [3]approximately $80 million. Total reserves related to these investments are approximately 91 million tons.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com [4].


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