Eagle Materials Expands with Louisville, Kentucky Cement Plant Complex
Dallas-based Eagle Materials manufactures and distributes Cement, Gypsum Wallboard, Recycled Paperboard, Concrete, Sand and Aggregates, from more than 75 facilities across the US.
According to company officials “the purchase price is $665 million, subject to customary post-closing adjustments. Eagle anticipates certain tax benefits arising from the transaction, the net present value of which is expected to be approximately $120 million.”
The plant has the capacity to produce nearly 1.7 million tons of cement annually. Its related assets include seven distribution terminals and substantial raw material reserves.
Michael Haack, Eagle Materials Inc. President & CEO, said the agreement represents a significant milestone in the company's growth strategy. “At Eagle we have been disciplined in the strategic growth of our integrated network of cement plants in the US heartland, and the Kosmos facilities are a natural fit. The Kosmos facilities are high-quality, low-cost assets that align with our long-term strategic growth plans and meet our criteria for new investment. These assets will also enable us to participate more significantly in US construction and infrastructure market growth.”
Mike Nicolais, Eagle Materials Board Chairman, added, “This acquisition is an exceptional geographic fit with our existing system of heartland-US cement assets. It not only extends our reach in key US markets, but also enhances the near and long-term cash flow generation capabilities of our businesses. Also this acquisition is especially timely in light of our previously announced plans to separate our Heavy Materials and Light Materials businesses into two independent, publicly traded corporations. Moreover, this investment reflects the balanced approach Eagle takes in capital allocation between profitable growth and the return of capital to shareholders, and combined with the more than $320 million of capital we returned to shareholders in the first half of the year, it reflects the strong cash flow generation capabilities of our businesses.”
The transaction is expected to close in the first quarter of calendar 2020, following the receipt of required regulatory approvals and other customary closing conditions, officials said. Calendar 2019 normalized revenue and EBITDA before synergies for the acquired assets is estimated to be $170 million and $56 million, respectively. The acquisition will increase Eagle's US cement capacity by roughly 25% and is expected to be accretive to earnings and cash flow in the first full year of ownership.
Eagle said it “intends to finance the acquisition through a combination of cash on hand and borrowings under a new term loan. Eagle remains focused on maintaining a prudent capital structure and a strong financial position following the close and financing of the transaction.”
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