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
– 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
–
Acquisition of Stavola
Commenting on the acquisition,
“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 65% of Arcosa’s LTM Adjusted EBITDA, and consolidated LTM Adjusted EBITDA Margin expands approximately 220 basis points. Stavola brings an experienced management team, a reputation for strong customer service, and a successful track record.”
Strategic Divestitures
Divestiture of Steel Components
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
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
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
– 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
– 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
Approvals and Timing
The actions announced today have been unanimously approved by the Company’s Board of Directors.
Advisors
Barclays and Evercore served as financial advisors to
Conference Call Details
A conference call is scheduled for
About
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.
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
|
|
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
|
|
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.
|
|
|
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 |
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INVESTOR CONTACTS
Chief Financial Officer
Director of Investor Relations
T 972.942.6500
InvestorResources@arcosa.com
ADVISIR
T 212.661.2220
David.Gold@advisiry.com
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