- Acquisition Expands Aggregates Business into Attractive Houston
Region
- Builds Leadership Position in Growing Recycled Aggregates
Market
- Provides Platform for Additional Growth in Natural and Recycled
Aggregates
- Conference Call Scheduled for 4:30 p.m. Eastern Time Today
to Discuss the Transaction
Arcosa, Inc. (NYSE: ACA) (“Arcosa” or the “Company”), a provider
of infrastructure-related products and solutions, today announced
that it has reached a definitive agreement to acquire Cherry
Industries, Inc. and affiliated entities (“Cherry” or “Cherry
Companies”) for $298 million.
Cherry is a leading producer of natural and recycled aggregates
in the Houston, Texas market. For the twelve-month period ended
September 30, 2019, Cherry had revenues of approximately $176
million and EBITDA of approximately $37 million.
Established in 1952, Cherry has developed a unique platform of
mines, processing facilities, and services across the Houston area
to offer a range of construction materials to customers. It serves
diverse infrastructure markets, including highway, industrial,
commercial, and residential markets, and also provides concrete
demolition services, primarily to secure raw material for recycled
aggregates.
Cherry adds 12 Houston locations to Arcosa’s existing 19 active
aggregate and specialty materials locations in Texas, building out
Arcosa’s footprint in a key Texas market with healthy population
growth, major highway investments, and positive private demand
drivers.
Commenting on the transaction, Antonio Carrillo, Arcosa’s
President and CEO, noted, “We are very excited about this
acquisition. The transaction is aligned with our strategic plan,
accelerating the growth of our high-value Construction Products
segment and enhancing our geographic position within Texas.
Cherry’s unique platform will provide additional organic and
acquisition growth opportunities in Houston and adjacent markets in
Texas and the Gulf Coast. Cherry’s unique business model of
offering aggregates in combination with recycled aggregates
represents an opportunity for Arcosa to replicate in other
regions.
“Additionally, the acquisition gives us an immediate leadership
position in recycled aggregates, a growing product category due to
resource scarcity and ESG benefits. Recycling aggregates decreases
landfill use and improves air quality by reducing haul distances
and energy consumption. Cherry is the largest recycled aggregates
company in the country, and we look forward to building on Cherry’s
leadership position.”
Leonard Cherry, President of Cherry, added, “We are very pleased
to join Arcosa, which represents an excellent cultural and
strategic fit for our employees and our business. We look forward
to working with the Construction Products team to grow our natural
and recycled aggregates business in Houston and in new
markets.”
The Company expects to fund the $298 million purchase price with
a combination of cash on-hand and borrowings available under its
credit facility. The transaction, which has been approved by the
Company’s Board of Directors, is subject to customary closing
conditions and regulatory provisions under the Hart-Scott-Rodino
Act and is expected to close in the first quarter of 2020.
The transaction is expected to be accretive to earnings in 2020,
and the Company expects to provide guidance for full year 2020 when
it releases its fourth quarter and full year 2019 results in late
February 2020.
Gibson Dunn acted as legal advisor to Arcosa. Stephens, Inc.
served as financial advisor and Bradley Arant Boult Cummings LLP
acted as legal advisor to Cherry.
Conference Call Information
A conference call is scheduled for 4:30 p.m. Eastern time today
to discuss the transaction. A slide presentation for this
conference call will be posted on the Company’s website at
http://ir.arcosa.com/Events approximately 15 minutes before the
start of the call. The conference call number is 877-830-2589 for
domestic callers and 785-424-1737 for international callers. The
conference ID is ARCOSA. An audio playback will be available
through 11:59 p.m. Eastern time on December 26, 2019 by dialing
800-839-5689 for domestic callers and 402-220-2570 for
international callers. A live audio webcast of the conference call
with a slide presentation will be available to the public and a
replay will be available after the call by visiting Arcosa’s
website at http://ir.arcosa.com/Events.
About Arcosa
Arcosa, Inc. (NYSE:ACA), headquartered in Dallas, Texas, is a
provider of infrastructure-related products and solutions with
leading positions in construction, energy, and transportation
markets. Arcosa reports its financial results in three principal
business segments: the Construction Products Group, the Energy
Equipment Group, and the Transportation Products Group. For more
information, visit www.arcosa.com.
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,” 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 achievement of
the expected benefits of Arcosa’s spin-off from Trinity; tax
treatment of the spin-off; inability to consummate the Cherry
acquisition within the expected time period or at all, failure to
successfully integrate Cherry, or failure to achieve the expected
benefits of the acquisition; 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; improving
margins; 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, 2018, as may be revised and
updated by Arcosa's Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
Reconciliation of EBITDA for Cherry (in millions)
(unaudited)
“EBITDA” is defined as Cherry’s net income plus interest
expense, income taxes, and depreciation and amortization. EBITDA is
not a calculation based on generally accepted accounting
principles. The amounts included in the EBITDA calculation,
however, are derived from amounts included in the historical
statements of operations data. In addition, EBITDA should not be
considered as an alternative to net income or operating income as
an indicator of Cherry’s operating performance, or as an
alternative to operating cash flows as a measure of liquidity. We
believe EBITDA assists investors in comparing a company’s
performance on a consistent basis without regard to depreciation
and amortization and other expenses, which can vary significantly
depending upon many factors.
EBITDA for Cherry (For the Trailing
Twelve Months Ended September 30, 2019)
Net income
$
28.5
Add:
Interest expense
0.1
Provision for income taxes
1.2
Depreciation and amortization expense
7.1
EBITDA
$
36.9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191212005817/en/
Scott C. Beasley Chief Financial Officer
Gail M. Peck SVP, Finance & Treasurer
T 972.942.6500 InvestorResources@arcosa.com
David Gold ADVISIRY Partners
T 212.661.2220 David.Gold@advisiry.com
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