Residential is up, but highways are status quo (at best)


May 1, 2013

By George H. Reddin



The first quarter of 2013 closed with slow, but steady, deal activity — the same pattern we’ve seen in recent years. The demand from buyers is as healthy as we have seen in years, and there remains a significant supply of sellers, which bodes well for deals going forward. That said, the remaining uncertainty associated with the overall economic recovery, the sustainability of the recovery in residential construction market, and the future of federal and state highway construction leave us in the same place that we have been for a while — a disconnect between buyer and seller price expectations. Add to that little or no progress in the debt markets and we remain stuck in an environment of slow, but steady, deal activity.

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

The national convention season for the construction materials sector is over, and the sentiment at the National Stone, Sand & Gravel Association; the National Asphalt Pavement Association; and the National Ready Mixed Concrete Association was similar, with most expecting improvement in the residential sector and status quo, or worse, in the highway sector. Overall, the sentiment was that the current state of the market is the new normal. While significant increases are expected in residential construction activity, the construction aggregates sector should experience more modest growth as a significant amount of the residential construction will take place in developments where the infrastructure in roads, curbs, and gutters have already been completed. As such, the anticipated residential construction will be lower in construction aggregate consumption than normal.


Recent transactions

Sources: New York Stock Exchange, NASDAQ, and Wall Street Journal Market Watch. Currency conversion calculated on 4/3/13.

Summit Materials acquired Lafarge North America’s aggregates, concrete, and asphalt/paving operations located in Wichita, Kan. The deal consists of Lafarge’s three aggregate quarries, five ready-mixed concrete sites, and three asphalt operations in the Wichita area. This transaction marks the continuation of divestitures by Lafarge in the United States.

Trinity Materials, Inc., a subsidiary of Trinity Industries, Inc., closed its previously announced agreement to acquire certain aggregates operations of Texas Industries, Inc., in Texas, Colorado, and California, as well as Texas Industries’ DiamondPro product-line.

In exchange for those assets, Trinity Industries transferred to Texas Industries its remaining ready-mix operations located in the East Region of Texas and parts of Arkansas, representing the full divestiture of its ready-mix concrete business.

georgeUntitled-1George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at

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