Knife River Enters Definitive Agreement to Acquire Strata Corporation
Knife River (NYSE: KNF) has announced a definitive agreement to acquire Strata for $454 million, representing a high single-digit multiple based on Strata's projected 2025 Adj. EBITDA. Founded in 1910, Strata is a vertically integrated construction materials provider with over 75 aggregates locations, 28 ready-mix plants, three asphalt plants, and extensive rail assets in North Dakota and northwestern Minnesota.
The acquisition, expected to close in first half 2025, will be financed through cash on hand and long-term debt issuance. Knife River expects the deal to be accretive to its Adj. EBITDA margin within the first year. Strata, which employs over 900 team members during peak season, will integrate into Knife River's Central Segment, expanding the company's service territory in a familiar region.
Knife River (NYSE: KNF) ha annunciato un accordo definitivo per acquisire Strata per 454 milioni di dollari, rappresentando un multiplo a cifra alta basato sulle proiezioni di EBITDA Adj. di Strata per il 2025. Fondata nel 1910, Strata è un fornitore di materiali da costruzione verticalmente integrato, con oltre 75 località di aggregati, 28 impianti di calcestruzzo preconfezionato, tre impianti di asfalto e ampie risorse ferroviarie nel Dakotas del Nord e nel Minnesota nordoccidentale.
L'acquisizione, prevista per essere conclusa nel primo semestre del 2025, sarà finanziata tramite liquidità disponibile e emissione di debito a lungo termine. Knife River prevede che l'operazione sarà accrescitiva per il suo margine EBITDA Adj. entro il primo anno. Strata, che impiega oltre 900 membri del team durante la stagione di punta, si integrerà nel Segmento Centrale di Knife River, ampliando il territorio di servizio dell'azienda in una regione familiare.
Knife River (NYSE: KNF) ha anunciado un acuerdo definitivo para adquirir Strata por 454 millones de dólares, lo que representa un múltiplo de dígitos altos basado en las proyecciones de EBITDA Ajustado de Strata para 2025. Fundada en 1910, Strata es un proveedor de materiales de construcción verticalmente integrado, con más de 75 ubicaciones de agregados, 28 plantas de concreto premezclado, tres plantas de asfalto y amplios activos ferroviarios en Dakota del Norte y el noroeste de Minnesota.
Se espera que la adquisición, que se cierre en la primera mitad de 2025, se financie con efectivo disponible y emisión de deuda a largo plazo. Knife River espera que el acuerdo sea accretivo para su margen de EBITDA Ajustado durante el primer año. Strata, que emplea a más de 900 miembros del equipo durante la temporada alta, se integrará en el Segmento Central de Knife River, ampliando el territorio de servicio de la compañía en una región familiar.
Knife River (NYSE: KNF)는 Strata를 4억 5,400만 달러에 인수하기 위한 확정 계약을 발표했습니다. 이는 Strata의 2025년 조정 EBITDA 예상치를 바탕으로 한 높은 싱글 디지털 배수를 나타냅니다. 1910년에 설립된 Strata는 75개 이상의 골재 위치, 28개의 레디 믹스 플랜트, 3개의 아스팔트 플랜트 및 노스 다코타와 미네소타 북서부의 광범위한 철도 자산을 보유한 수직적으로 통합된 건축 자재 공급업체입니다.
이 인수는 2025년 상반기까지 마무리될 것으로 예상되며, 보유 현금과 장기 채무 발행을 통해 자금 조달됩니다. Knife River는 이 거래가 첫 해 내에 조정 EBITDA 마진에 긍정적인 영향을 미칠 것으로 기대하고 있습니다. 성수기 동안 900명 이상의 팀원을 고용하고 있는 Strata는 Knife River의 중앙 세그먼트에 통합되어 회사의 서비스 영역을 친숙한 지역으로 확장하게 됩니다.
Knife River (NYSE: KNF) a annoncé un accord définitif pour acquérir Strata pour 454 millions de dollars, ce qui représente un multiple à un chiffre élevé basé sur les prévisions de l'EBITDA Ajusté de Strata pour 2025. Fondée en 1910, Strata est un fournisseur de matériaux de construction intégrés verticalement, avec plus de 75 sites d'agrégats, 28 centrales à béton, trois centrales d'asphalte et des actifs ferroviaires étendus dans le Dakota du Nord et le nord-ouest du Minnesota.
L'acquisition, qui devrait se finaliser au cours de la première moitié de 2025, sera financée par des liquidités disponibles et des émissions de dettes à long terme. Knife River s'attend à ce que l'opération soit positive pour sa marge d'EBITDA Ajusté au cours de la première année. Strata, qui emploie plus de 900 membres de l'équipe pendant la saison de pointe, s'intégrera dans le Segment Central de Knife River, élargissant ainsi le territoire de service de l'entreprise dans une région familière.
Knife River (NYSE: KNF) hat eine endgültige Vereinbarung zur Übernahme von Strata für 454 Millionen Dollar bekannt gegeben, was ein hohes einstelliges Vielfaches basierend auf den prognostizierten 2025 Adj. EBITDA von Strata darstellt. Strata, gegründet 1910, ist ein vertikal integrierter Anbieter von Baumaterialien mit über 75 Standorten für Aggregatmischungen, 28 Fertigmischanlagen, drei Asphaltanlagen und umfangreichen Schieneigentümern in Norddakota und im Nordwesten Minnesotas.
Die Übernahme, die in der ersten Hälfte von 2025 abgeschlossen werden soll, wird durch vorhandenes Bargeld und die Emission von langfristigen Schulden finanziert. Knife River erwartet, dass der Deal im ersten Jahr positiv auf die Adj. EBITDA-Marge wirkt. Strata, das während der Hochsaison über 900 Teammitglieder beschäftigt, wird in den Zentralbereich von Knife River integriert, wodurch das Servicegebiet des Unternehmens in einer vertrauten Region erweitert wird.
- Strategic acquisition valued at $454M expanding market presence in ND and MN
- Expected to be EBITDA margin accretive within first year
- Adds significant assets: 75+ aggregates locations, 28 ready-mix plants, 3 asphalt plants
- Brings 900 seasonal employees and established market presence
- Vertical integration synergies with existing operations
- Significant debt financing required for the $454M purchase
- Integration risks with large workforce and extensive operations
- Regulatory approval pending and could delay closing
Insights
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The transaction's valuation appears reasonable given the current market conditions and Strata's strategic assets, particularly its rail infrastructure which provides important logistics advantages. Expected EBITDA margin accretion within the first year suggests well-planned integration and immediate value creation. The geographic expansion in North Dakota and Minnesota strengthens Knife River's Central Segment market position, potentially leading to improved pricing power and operational efficiency.
For investors, this represents a calculated growth move that could enhance Knife River's competitive position in the construction materials sector. The deal's timing aligns with increased infrastructure spending trends and positions KNF to capture greater market share in key regional markets.
The acquisition's strategic value extends beyond immediate financial metrics. Strata's century-plus operating history and established market presence provide Knife River with valuable customer relationships and local market expertise. The vertical integration aspect, combining aggregates, ready-mix and contracting services, creates a robust end-to-end solution that can better weather market cycles.
Particularly noteworthy is Strata's rail asset portfolio, which provides a significant competitive advantage in materials transportation and distribution. This infrastructure enables efficient market access and cost-effective delivery of aggregates, a important factor in maintaining healthy margins in the construction materials sector. The geographic expansion strengthens Knife River's regional density, potentially leading to improved operational leverage and market penetration.
Founded in 1910, Strata is an aggregates-based, vertically integrated company with over 75 aggregates locations, extensive aggregate reserves and rail assets to bring those reserves to market. The company has 28 ready-mix plants, three asphalt plants and a contracting services division that specializes in asphalt paving and concrete construction. Strata is headquartered in
“Strata is respected among its peers and in its communities, and is well-known for its strong culture and expertise,” said Knife River President and CEO Brian Gray. “It is a great success story – growing from a single gravel operation into a leading supplier of construction materials that employs over 900 team members during the peak season. We look forward to completing the transaction and welcoming the Strata team to the Life at Knife.”
The transaction is expected to close in the first half of 2025, subject to regulatory approval and customary closing conditions. Knife River expects to use cash on hand and the proceeds from the issuance of long-term debt to finance the acquisition.
“We believe this acquisition is a prime example of our ‘Competitive EDGE’ strategy to profitably grow our business,” Gray said. “We expect Strata to be accretive to Knife River’s Adj. EBITDA margin within the first year. Strata’s high-quality assets allow us to expand our service territory within a region we know well. We believe this is a great, long-term fit for us.”
Strata was founded 114 years ago as Bradshaw Gravel Supply. Majority shareholder James Bradshaw oversaw much of the company’s growth during his 46 years as president.
“It’s not easy building a family business and it’s even harder coming to the point where you are ready to step away from it,” Bradshaw, Strata’s chairman and CEO, said. “I believe there is a great fit between Strata and Knife River. Both companies are strongly aligned with our cultures of putting people first and operating with integrity. We want what is best for our team and their future, and we believe that is with Knife River.”
About Knife River
Knife River Corporation, a member of the S&P MidCap 400 index, mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mix concrete, asphalt and other value-added products. Knife River also performs vertically integrated contracting services, specializing in publicly funded DOT projects and private projects across the industrial, commercial and residential space. For more information about the company, visit www.kniferiver.com.
Forward-Looking Statements
The information in this news release highlights the key growth strategies, projections and certain assumptions for the company and its subsidiaries, including with respect to the consummation of the acquisition of Strata and the timing and benefits thereof. Many of these highlighted statements and other statements not historical in nature are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Although the company believes that its expectations are expressed in good faith and based on reasonable assumptions, there is no assurance the company’s projections or estimates for growth, shareholder value creation, long-term goals, other proposed strategies or statements related to the acquisition of Strata will be achieved. Please refer to assumptions contained in this news release, as well as the various important factors listed in Part I, Item 1A - Risk Factors in the company's 2023 Form 10-K and subsequent filings with the Securities and Exchange Commission.
Changes in such assumptions and factors could cause actual future results to differ materially from those expressed in the forward-looking statements. All forward-looking statements in this news release are expressly qualified by such cautionary statements and by reference to the underlying assumptions. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Except as required by law, Knife River does not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
Adjusted EBITDA margin is considered a non-GAAP measure of financial performance. This non-GAAP financial measure is not a measure of financial performance under GAAP. The items excluded from this non-GAAP financial measure are significant components in understanding and assessing financial performance. Therefore, this non-GAAP financial measure should not be considered a substitute for the applicable GAAP metric.
Adjusted EBITDA margin is most directly comparable to the corresponding GAAP measure of net income margin. We believe this non-GAAP financial measure, in addition to the corresponding GAAP measure, is useful to investors by providing meaningful information about operational efficiency compared to our peers by excluding the impacts of differences in tax jurisdictions and structures, debt levels and capital investment. We believe Adjusted EBITDA margin is a useful performance measure because it allows for an effective evaluation of our operating performance by excluding stock-based compensation and unrealized gains and losses on benefit plan investments as they are considered non-cash and not part of our core operations. We also exclude the one-time, non-recurring costs associated with the separation of Knife River from MDU Resources as those are not expected to continue. We believe Adjusted EBITDA margin is a useful performance measure because it provides clarity as to the operational results of the company. Our management uses this non-GAAP financial measure in conjunction with GAAP results when evaluating our operating results internally and calculating employee incentive compensation.
EBITDA is calculated by adding back income taxes, interest expense (net of interest income) and depreciation, depletion and amortization expense to net income. Adjusted EBITDA is calculated by adding back unrealized gains and losses on benefit plan investments, stock-based compensation and one-time separation costs, to EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, the GAAP financial measure of net income margin and is intended to be a helpful supplemental financial measure for investors’ understanding of our operating performance. Our non-GAAP financial measure is not standardized; therefore, it may not be possible to compare this financial measure with other companies’ Adjusted EBITDA margin measure having the same or similar names.
Knife River’s projection for Adjusted EBITDA margin and Strata’s projected 2025 Adjusted EBITDA are non-GAAP financial measures that exclude or otherwise have been adjusted for non-GAAP adjustment items from Knife River’s or Strata’s GAAP financial statements, as applicable. When the company provides its forward-looking projection for Adjusted EBITDA margin and Strata’s projected 2025 Adjusted EBITDA, it does not provide a reconciliation of these non-GAAP financial measures as Knife River is unable to predict with a reasonable degree of certainty the actual impact of the non-GAAP adjustment items. By their very nature, non-GAAP adjustment items are difficult to anticipate with precision because they are generally associated with unexpected and unplanned events that impact our company and its financial results, including, but not limited to, the potentially high variability, complexity and low visibility with respect to the items that would be excluded from the applicable GAAP measure in the relevant future period, such as unusual gains and losses, the impact and timing of potential acquisitions and divestitures, certain financing costs and other structural changes or their probable significance. Therefore, Knife River is unable to provide a reconciliation of these measures without unreasonable efforts.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241220739075/en/
Media:
Tony Spilde, senior director of communications, 541-693-5949
Investor:
Zane Karimi, director of investor relations, 503-944-3508
Source: Knife River Corporation
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