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Vulcan (VMC) U.S. Concrete Buyout Boosts Aggregates Business

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Vulcan Materials Company (VMC - Free Report) has wrapped up the previously announced acquisition of U.S. Concrete, thereby enhancing its aggregates-led business with additional geographic reach. U.S. Concrete is now a wholly-owned subsidiary of Vulcan.

In this regard, Tom Hill, chairman and CEO of Vulcan, said, “With our complementary footprints and shared commitment to innovation and operational excellence, Vulcan will have enhanced scale within our aggregates business and additional geographic reach in attractive growing metropolitan areas to serve our customers.”

As announced in Jun 7, 2021, Vulcan acquired U.S. Concrete for $74.00 per share in cash, which represents a total equity value of $1.294 billion.

Buyout Benefits

The acquisition of Euless, TX-based aggregate producer — which provides access to blue-water source of superior aggregates reserves — is a natural fit for Vulcan's existing aggregates business in California. U.S. Concrete has 27 aggregates operations serving California, Texas and the Northeast, with a shipment of 12.6 million tons in 2020.

This buyout further offers strategically oriented ready-mixed concrete operations that will enhance Vulcan's service competences and expand aggregates footprint, including New York and New Jersey metropolitan areas.

Vulcan expects this buyout to boost EBITDA by $190 million before synergies and be accretive to earnings per share in the first full year post the transaction’s closure.

Vulcan’s Inorganic Drive

Since becoming a public company in 1956, Vulcan has followed a systematic inorganic strategy for expansion and wrapped up various bolt-on acquisitions that have contributed significantly to growth.

As of Mar 31, 2021, it completed more than two dozen value-enhancing acquisitions since 2014 in some of the fastest-growing markets in the country. During 2020, Vulcan purchased businesses that will support aggregates operations for a total consideration of $73,416,000 (both cash and non-cash). Meanwhile, it completed two acquisitions — one aggregate operation in Tennessee and another ready-mixed concrete operation in Virginia — in 2019.

Increasing public construction demand and a resurgence in demand on the private side, particularly residential, have been benefiting Vulcan. Even projects that were paused at the onset of the coronavirus pandemic have started executing on their backlog of projects.

Zacks Investment Research
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Although shares of this Zacks Rank #4 (Sell) company have underperformed the Zacks Building Products - Concrete and Aggregates industry year to date, Vulcan is poised to benefit from a significant boost in infrastructural and public construction spending in the United States. The company has been gaining strength from growth in heavy industrial projects such as data centers and warehouses. Also, strategic initiatives and business acquisitions bode well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

Some better-ranked stocks in the broader Construction sector include Cornerstone Building Brands, Inc. (CNR - Free Report) , Armstrong World Industries, Inc. (AWI - Free Report) and Masco Corporation (MAS - Free Report) .

Cornerstone Building, sporting a Zacks Rank #1, has an expected earnings growth of 547.9% for 2021.

Earnings for Armstrong World and Masco — both carrying a Zack Rank #2 (Buy) — are expected to grow 16.3% and 18.6%, respectively, for the current year.