Arcosa, Inc. Announces Agreement to Acquire the Construction Materials Business of Stavola Holding Corporation for $1.2 Billion and Other Value Enhancing Portfolio Actions to Accelerate Long-Term Strategy
Arcosa Inc (NYSE: ACA) has announced significant portfolio actions to advance its long-term strategy:
1. Acquisition: Arcosa will acquire Stavola's construction materials business for $1.2 billion, expanding into the New York-New Jersey MSA with an aggregates-led platform generating $283 million in revenue and $100 million in Adjusted EBITDA.
2. Divestitures: Arcosa will sell its steel components business and has completed the sale of other non-core assets for a total of $137 million.
These actions will accelerate Arcosa's shift to higher-margin Construction Products, reducing portfolio complexity and cyclicality. Post-transactions, Construction Products will represent 65% of Arcosa's Adjusted EBITDA, with overall LTM Adjusted EBITDA margin expanding by 220 basis points.
Arcosa Inc (NYSE: ACA) ha annunciato azioni significative relative al portafoglio per promuovere la sua strategia a lungo termine:
1. Acquisizione: Arcosa acquisterà il business dei materiali da costruzione di Stavola per 1,2 miliardi di dollari, espandendosi nell'area metropolitana di New York-New Jersey con una piattaforma guidata dagli aggregati che genera 283 milioni di dollari di fatturato e 100 milioni di dollari di EBITDA rettificato.
2. Cessioni: Arcosa venderà il suo business dei componenti in acciaio e ha completato la vendita di altri asset non strategici per un totale di 137 milioni di dollari.
Queste azioni accelereranno il passaggio di Arcosa verso prodotti per la costruzione ad alto margine, riducendo la complessità e la ciclicità del portafoglio. Dopo le transazioni, i prodotti per la costruzione rappresenteranno 65% dell'EBITDA rettificato di Arcosa, con un margine di EBITDA rettificato complessivo che si espande di 220 punti base.
Arcosa Inc (NYSE: ACA) ha anunciado acciones importantes en su portafolio para avanzar en su estrategia a largo plazo:
1. Adquisición: Arcosa adquirirá el negocio de materiales de construcción de Stavola por 1.2 mil millones de dólares, expandiéndose en la área metropolitana de Nueva York-Nueva Jersey con una plataforma centrada en agregados que genera 283 millones de dólares en ingresos y 100 millones de dólares en EBITDA ajustado.
2. Desinversiones: Arcosa venderá su negocio de componentes de acero y ha completado la venta de otros activos no estratégicos por un total de 137 millones de dólares.
Estas acciones acelerarán el cambio de Arcosa hacia productos de construcción de mayor margen, reduciendo la complejidad y la cíclica de su portafolio. Después de las transacciones, los productos de construcción representarán 65% del EBITDA ajustado de Arcosa, con un margen total de EBITDA ajustado que se expande en 220 puntos básicos.
Arcosa Inc (NYSE: ACA)는 장기 전략을 발전시키기 위해 중요한 포트폴리오 조치를 발표했습니다:
1. 인수: Arcosa는 12억 달러에 Stavola의 건설 자재 사업을 인수하여 2억 8천3백만 달러의 수익과 1억 달러의 조정 EBITDA를 생성하는 집합체 중심 플랫폼으로 뉴욕-뉴저지 MSA로 확장합니다.
2. 매각: Arcosa는 철강 부품 사업을 매각하고 있으며, 총 1억 3천7백만 달러에 다른 비핵심 자산 매각을 완료했습니다.
이러한 조치는 Arcosa가 고마진 건설 제품으로 전환하는 속도를 높일 것입니다, 포트폴리오의 복잡성과 주기성을 줄입니다. 거래 후, 건설 제품은 Arcosa의 조정 EBITDA의 65%를 차지하며, 전체 LTM 조정 EBITDA 마진은 220 베이시스 포인트 확대됩니다.
Arcosa Inc (NYSE: ACA) a annoncé des actions significatives concernant son portefeuille pour faire progresser sa stratégie à long terme :
1. Acquisition: Arcosa va acquérir l'activité de matériaux de construction de Stavola pour 1,2 milliard de dollars, s'étendant dans la zone métropolitaine de New York-New Jersey avec une plateforme axée sur les granulats générant 283 millions de dollars de revenus et 100 millions de dollars d'EBITDA ajusté.
2. Désinvestissements: Arcosa va vendre son activité de composants en acier et a finalisé la vente d'autres actifs non stratégiques pour un total de 137 millions de dollars.
Ces actions vont accélérer le passage d'Arcosa vers des produits de construction à forte marge, réduisant la complexité et la cyclicité du portefeuille. Après les transactions, les produits de construction représenteront 65% de l'EBITDA ajusté d'Arcosa, l'ensemble du ratio EBITDA ajusté augmentant de 220 points de base.
Arcosa Inc (NYSE: ACA) hat bedeutende Portfolio-Maßnahmen angekündigt, um seine langfristige Strategie voranzutreiben:
1. Akquisition: Arcosa wird das Bau-Materialgeschäft von Stavola für 1,2 Milliarden Dollar erwerben und sich in der Metropolregion New York-New Jersey mit einer aggregatsgeführten Plattform ausdehnen, die 283 Millionen Dollar an Einnahmen und 100 Millionen Dollar an bereinigtem EBITDA generiert.
2. Verkäufe: Arcosa wird sein Geschäft mit Stahlkomponenten verkaufen und hat den Verkauf weiterer nicht zum Kerngeschäft gehörender Vermögenswerte in Höhe von insgesamt 137 Millionen Dollar abgeschlossen.
Diese Maßnahmen werden Arcosa's Wechsel zu margenstärkeren Bauprodukten beschleunigen, die Komplexität und Zyklizität des Portfolios verringern. Nach den Transaktionen werden Bauprodukte 65% des bereinigten EBITDA von Arcosa ausmachen, während die Gesamtkapitalrendite des bereinigten EBITDA um 220 Basispunkte steigt.
- Acquisition of Stavola's construction materials business for $1.2 billion, expanding into the largest US MSA
- Stavola acquisition adds $283 million in revenue and $100 million in Adjusted EBITDA with a 35% margin
- Divestitures of non-core assets for $137 million, streamlining the portfolio
- Construction Products segment to represent 65% of Arcosa's Adjusted EBITDA post-transactions
- Overall LTM Adjusted EBITDA margin expected to expand by 220 basis points
- Anticipated tax benefits from Stavola acquisition with net present value of $125 million
- Initial net leverage above targeted range due to acquisition financing
- Goal to return to long-term net leverage target range within 18 months, indicating short-term elevated debt levels
- Pro forma LTM Net Debt to Adjusted EBITDA ratio of approximately 3.7x post-acquisition
Insights
The acquisition of Stavola's construction materials business for
The acquisition aligns with Arcosa's long-term strategy to focus on higher-margin construction products and reduce cyclicality in its portfolio. Post-acquisition, Construction Products will represent
However, investors should note that the acquisition will initially push Arcosa's leverage above its target range, with pro forma LTM Net Debt to Adjusted EBITDA at approximately 3.7x. The company aims to deleverage to its 2.0-2.5x target within 18 months, which will be important to monitor.
The simultaneous divestiture of the steel components business and other non-core assets for
In summary, these transactions represent a bold strategic shift for Arcosa, potentially positioning it for stronger, more stable growth in the infrastructure sector. However, the success of this strategy will depend on effective integration of Stavola and management's ability to deliver on deleveraging goals.
Arcosa's acquisition of Stavola's construction materials business is a strategic play to capitalize on infrastructure-driven tailwinds in the construction sector. The deal provides Arcosa with a strong foothold in the New York-New Jersey Metropolitan Statistical Area, the largest MSA in the U.S., which offers significant growth potential.
The construction materials market, particularly aggregates, is known for its stability and local monopolistic characteristics due to high barriers to entry. Stavola's estimated 350 million tons of hard rock aggregates reserves represent a valuable long-term asset that's difficult to replicate. This acquisition positions Arcosa to benefit from increased infrastructure spending, both from government initiatives and private sector development in this densely populated region.
Moreover, the vertically integrated nature of Stavola's operations, with five hard rock quarries, twelve asphalt plants and three recycled aggregates sites, provides operational synergies and multiple revenue streams. The
The divestiture of the steel components business and other non-core assets aligns with broader market trends of companies streamlining their portfolios to focus on core competencies. This move could potentially lead to improved operational efficiency and better capital allocation.
However, it's important to consider the cyclical nature of the construction industry. While infrastructure projects provide some stability, economic downturns can still impact demand. Arcosa's increased exposure to this sector through the Stavola acquisition means its performance will be more closely tied to construction activity going forward.
From a legal perspective, Arcosa's acquisition of Stavola and divestiture of its steel components business present several noteworthy aspects. First, the company has already obtained all necessary regulatory approvals for both transactions, which significantly reduces execution risk and potential legal hurdles. This swift approval process suggests that antitrust concerns were minimal, likely due to the fragmented nature of the construction materials market.
The structure of the Stavola acquisition is designed to create tax benefits with a net present value of approximately
The financing arrangement for the Stavola acquisition, including
Regarding the divestiture of the steel components business, the definitive agreement with Stellex Capital Management seems straightforward. However, as with any such transaction, it will be important to ensure all employee, environmental and contractual obligations are properly addressed in the transition to avoid potential legal issues.
Overall, these transactions appear to have been structured with careful legal consideration, minimizing potential risks and maximizing benefits within the bounds of corporate and tax law.
– Provides Scaled Aggregates-Led Platform with Revenues of
– Extends Footprint into Nation's Largest MSA
– Financing to Include New Long-Term Debt with Clear Path to Deleveraging
– Additionally, Executed Definitive Agreement to Divest Steel Components Business and Completed Sale of Other Non-Core Assets for Total Consideration of
– Transactions Accelerate Shift to Higher Margin Construction Products While Advancing Strategy to Reduce Complexity and Cyclicality of Overall Portfolio
– Arcosa Will Host a Conference Call to Discuss These Transactions and Its Second Quarter 2024 Results at 8:30 AM ET on Friday, August 2nd
Acquisition of Stavola
Arcosa has entered into a definitive agreement to acquire the construction materials business of Stavola Holding Corporation and its affiliated entities ("Stavola") for
Commenting on the acquisition, Antonio Carrillo, Arcosa’s President and Chief Executive Officer, noted, "Since becoming an independent public company in 2018, Arcosa has successfully executed against its long-term vision to grow in attractive markets and reduce the complexity and cyclicality of the overall business through strategic acquisitions and select divestitures. Over that time, we have expanded our Construction Products business both organically and inorganically, deploying approximately
“The acquisition of Stavola accelerates Arcosa’s strategic transformation by adding a premier aggregates-led platform in the nation’s largest MSA with favorable attributes from its exposure to lower volatility infrastructure-led end-markets. Pro forma for the transactions, Construction Products represents
Strategic Divestitures
Divestiture of Steel Components
Arcosa has also entered into a definitive agreement to sell its steel components business to Stellex Capital Management LLC, a
With a 150+ year legacy, Arcosa’s steel components business is a leading supplier of railcar coupling devices, railcar axles, and circular forgings. Based in
Additional Portfolio Actions
During the second quarter of 2024, the Company took additional actions to optimize its portfolio and improve margins:
– Divested its single-location subscale asphalt and paving operation located in
– Sold a non-operating facility within Engineered Structures
– Exited a small underperforming natural aggregates operation serving the Permian Basin in west
Total consideration for the divestitures was
Commenting on the portfolio actions, Carrillo continued, "Today’s announcements underscore the strength of our company and our confidence in the growth opportunities ahead of us. Construction Products and Engineered Structures are benefitting from increased scale and more resilient platforms and are well-positioned to benefit from infrastructure-driven tailwinds. Additionally, our two remaining cyclical businesses, wind towers and barge, command industry-leading positions with solid backlog visibility in place and anticipated multi-year market recoveries underway.
“We have committed financing in place to fund the purchase of Stavola that will result in initial net leverage above our targeted range. Our permanent financing strategy will allow for rapid deleveraging at an attractive cost of capital. Based on the anticipated strength of our cash flow generation, our goal is to return to our long-term net leverage targeted range within 18 months."
Carrillo concluded, “We believe these portfolio actions underscore our commitment to increasing long-term shareholder value and our disciplined approach to capital allocation. We look forward to welcoming the Stavola team and customer base to Arcosa, and express our gratitude to the employees of our steel components business for their dedication and contributions to Arcosa.”
Strategic and Financial Rationale for Portfolio Actions
– Extends Construction Products footprint into the nation’s largest MSA with a scaled and vertically integrated aggregates and FOB asphalt operation. Stavola operates in an attractive region with increased exposure to lower volatility, infrastructure-led end markets. Competitive advantages include a difficult to replicate leadership position underpinned by long-term customer relationships and an estimated 350 million tons of hard rock aggregates reserves commanding industry-leading profitability metrics.
– Represents attractive valuation for a scaled aggregates-led business with premium financial attributes. The
– Increases Arcosa's exposure to higher margin Construction Products Adjusted EBITDA. Stavola enhances the scale and margin profile of our Construction Products segment. On a pro forma LTM basis, Construction Products revenues increase
– Reduces the complexity and cyclicality of the portfolio. Divestiture of the steel components business, along with the other recent strategic actions, results in reduced exposure to cyclical end-markets and improved margin.
– Enhances Arcosa's overall profitability and financial profile. Pro forma for the transactions, Construction Products will represent
– Portfolio resilience supports Arcosa’s ability to maintain a healthy balance sheet through prudent deleveraging. Upon completion of the acquisition of Stavola, the Company’s pro forma LTM Net Debt to Adjusted EBITDA is approximately 3.7x. The increased scale of our growth businesses and anticipated market recovery in our cyclical businesses, bolstered by current backlog visibility, gives us line of sight to increased cash flow generation. With debt reduction as our near-term capital allocation priority, our goal is to de-lever to our long-term target of 2.0 to 2.5x within 18 months.
Financing
Arcosa has obtained
Approvals and Timing
The actions announced today have been unanimously approved by the Company’s Board of Directors. Arcosa has obtained all necessary regulatory approvals for the acquisition of Stavola and the divestiture of the steel components business. The Company anticipates the acquisition will be completed in the fourth quarter and the divestiture is expected to close during the third quarter.
Advisors
Barclays and Evercore served as financial advisors to Arcosa on the acquisition of Stavola. Evercore also served as financial advisor to Arcosa on the divestiture of the steel components business. Kirkland & Ellis served as legal advisor to the Company on the acquisition, and
Conference Call Details
A conference call is scheduled for 8:30 a.m. Eastern Time on August 2, 2024 to discuss the transactions and our second quarter 2024 results announced today in a separate release. To listen to the conference call webcast, please visit the Investor Relations section of Arcosa’s website at https://ir.arcosa.com. A slide presentation for this conference call will be posted on the Company’s website in advance of the call at https://ir.arcosa.com. The audio conference call number is 800-343-1703 for domestic callers and 785-424-1116 for international callers. The conference ID is ARCOSA and the passcode is 24246. An audio playback will be available through 11:59 p.m. Eastern Time on August 16, 2024, by dialing 800-839-1162 for domestic callers and 402-220-0398 for international callers. A replay of the webcast will be available for one year on Arcosa’s website at https://ir.arcosa.com/news-events/events-presentations.
About Arcosa
Arcosa, Inc., headquartered in
Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Arcosa’s estimates, expectations, beliefs, intentions or strategies for the future. Arcosa uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “outlook,” “strategy,” “plans,” “goal,”and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Arcosa expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, except as required by federal securities laws. Forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to assumptions, risks and uncertainties regarding failure to successfully complete and integrate acquisitions, including Ameron and Stavola, or divest any business, including the steel components business, or failure to achieve the expected benefits of acquisitions or divestitures; market conditions and customer demand for Arcosa’s business products and services; the cyclical nature of, and seasonal or weather impact on, the industries in which Arcosa competes; competition and other competitive factors; governmental and regulatory factors; changing technologies; availability of growth opportunities; market recovery; ability to improve margins; the impact of inflation and costs of materials; assumptions regarding achievements of the expected benefits from the Inflation Reduction Act; the delivery or satisfaction of any backlog or firm orders; the impact of pandemics on Arcosa’s business; and Arcosa’s ability to execute its long-term strategy, and such forward-looking statements are not guarantees of future performance. For further discussion of such risks and uncertainties, see “Risk Factors” and the “Forward-Looking Statements” section of “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Arcosa's Form 10-K for the year ended December 31, 2023 and as may be revised and updated by Arcosa's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
TABLES TO FOLLOW
Reconciliation of Stavola and Steel Components Adjusted EBITDA
(in millions)
(unaudited)
“EBITDA” is defined as net income plus interest, taxes, depreciation, depletion, and amortization. “Adjusted EBITDA” is defined as EBITDA adjusted for certain items that are not reflective of normal earnings. GAAP does not define EBITDA or Adjusted EBITDA and they should not be considered as alternatives to earnings measures defined by GAAP, including net income. We believe Adjusted EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation, depletion, amortization, and other items which can vary significantly depending on many factors.
|
Twelve Months Ended June 30, 2024 |
|
Stavola: |
|
|
Net income |
$ |
71.8 |
Add: |
|
|
Interest expense, net |
|
0.8 |
Provision for income taxes |
|
— |
Depreciation, depletion, and amortization expense |
|
18.9 |
EBITDA |
|
91.5 |
Non-recurring adjustments |
|
9.0 |
Stavola Adjusted EBITDA |
$ |
100.5 |
|
Twelve Months Ended June 30, 2024 |
|
Steel components business: |
|
|
Operating profit |
$ |
11.3 |
Add: Depreciation and amortization |
|
9.6 |
Steel components EBITDA |
|
20.9 |
Steel components Adjusted EBITDA |
$ |
20.9 |
Reconciliation of Net Debt to Adjusted EBITDA
($ in millions)
(unaudited)
GAAP does not define “Net Debt” and it should not be considered as an alternative to cash flow or liquidity measures defined by GAAP. The Company uses Net Debt, which it defines as total debt minus cash and cash equivalents to determine the extent to which the Company’s outstanding debt obligations would be satisfied by its cash and cash equivalents on hand. The Company also uses “Net Debt to Adjusted EBITDA”, which it defines as Net Debt divided by Adjusted EBITDA for the trailing twelve months as a metric of its current leverage position. We present this metric for the convenience of investors who use such metrics in their analysis and for shareholders who need to understand the metrics we use to assess performance and monitor our cash and liquidity positions.
|
June 30,
|
|
Pro forma
|
|
Pro forma
|
|||
Total Debt, excluding debt issuance costs |
$ |
710.4 |
|
$ |
1,200.0 |
|
$ |
1,910.4 |
Cash and cash equivalents |
|
103.7 |
|
|
— |
|
|
103.7 |
Net Debt |
$ |
606.7 |
|
$ |
1,200.0 |
|
$ |
1,806.7 |
|
|
|
|
|
|
|||
Adjusted EBITDA (last twelve months)(1) |
$ |
393.3 |
|
$ |
100.5 |
|
$ |
493.8 |
Net Debt to Adjusted EBITDA |
|
1.5 |
|
|
|
|
3.7 |
|
(1) See separate press release announcing Arcosa's second quarter 2024 earnings results. |
||||||||
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INVESTOR CONTACTS
Gail M. Peck
Chief Financial Officer
Erin Drabek
Director of Investor Relations
T 972.942.6500
InvestorResources@arcosa.com
David Gold
ADVISIRY Partners
T 212.661.2220
David.Gold@advisiry.com
MEDIA CONTACT
Source: Arcosa, Inc.
FAQ
What is the value of Arcosa's acquisition of Stavola's construction materials business?
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What divestitures has Arcosa announced alongside the Stavola acquisition?
How will these transactions affect Arcosa's portfolio composition?
What is Arcosa's plan for managing the increased debt from the Stavola acquisition?
