Balance sheet management continues among operators


November 1, 2013

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at


Corporate divestitures once again dominated the activity last month, with Lafarge North America, Inc. and Vulcan Materials Co. leading the way. Balance sheet management continues to be the emphasis to create liquidity and borrowing capacity to take advantage of when the market rebounds.

The construction materials market has lagged the overall market recovery and remains in a bit of a holding pattern until there is clarity on what happens post MAP-21 for highway funding. By example, the overall stock market (S&P 500 or DJI) has recovered since its peak and has been establishing new record highs. Conversely, most construction materials companies remain well below their peaks and, as a group, are trading close to half of their peak pricing. Positive trends and forecasts for residential construction are a source for optimism; highway funding appears destined for little or no growth; and who knows about the overall economy, with the recent interaction among our elected officials in Washington. All of this points to more of the same between now and year end.


Recent transactions

Lafarge North America Inc. sold its gypsum wallboard plant in Buchanan, N.Y., for $55.7 million to Lone Star Funds, a private equity firm in Dallas that invests globally in distressed assets. The deal was part of Lafarge North America’s sale of its gypsum division announced in June for a total enterprise value of $700 million. In 2011, Lafarge announced that its gypsum operations were being divested, as the company would focus on its core businesses of cement, aggregates, and ready-mix concrete. This was yet another divestiture by a publicly traded construction materials producer in an effort to improve its credit rating.

graphUntitled-1Vulcan Materials Co. has entered into a transaction with Plum Creek Timber Co., Inc. for the sale of an interest in the future production at four quarries in Atlanta, Ga. Vulcan will receive $154 million in exchange for a percentage royalty interest in 255 million tons of agggate production over approximately 25 years. Vulcan maintains full ownership and operational control of the quarries and records a pretax gain of $154 million, recognized over the life of the transaction.

chartUntitled-1Coco Group, headquartered in Toronto, has acquired Russell Redi-Mix Concrete, Langenburg Redi-Mix Ltd., and Roblin Redi-Mix Ltd., commonly referred to as the Russell Group (RRMC), located in Manitoba and Saskatchewan. RRMC provides heavy civil contracting; aggregates production, supply, and hauling; excavation grading and site preparation services; roadway construction and rehabilitation; railway works; and ready-mix concrete production and supply.

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