Arcosa has announced a definitive agreement to acquire the construction materials business of Stavola for $1.2bn in cash, subject to customary post-closing adjustments.
This move is expected to enhance Arcosa’s presence in the New York-New Jersey metropolitan statistical area (MSA), US.
Founded in 1948, Stavola operates a network of five hard-rock natural aggregate quarries, 12 asphalt plants, and three recycled aggregate sites.
The acquisition is expected to create tax benefits for Arcosa, with a present net value of approximately $125m.
Additionally, Arcosa has agreed to sell its steel components business to Stellex Capital Management, a private equity company based in New York.
The transaction will extend Arcosa’s Construction Products footprint into the country’s largest MSA with a scaled and vertically integrated aggregate and FOB asphalt operation.
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By GlobalDataOn a pro forma last 12 months (LTM) basis, Construction Products revenues are set to increase by 28% to $1.3bn, and adjusted segment earnings before interest, taxes, depreciation, and amortisation (EBITDA) are expected to grow by 42% to $342m.
Arcosa president and CEO Antonio Carrillo said: “The acquisition of Stavola accelerates Arcosa’s strategic transformation by adding a premier aggregates-led platform in the nation’s largest MSA with favourable 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.”
Post-acquisition, the company’s pro forma LTM net debt to adjusted EBITDA is anticipated to be approximately 3.7x.
The divestiture of the steel components business, combined with other recent actions, will lead to reduced exposure to cyclical end markets and improved margin for Arcosa.
Financial advisory services for the acquisition of Stavola were provided to Arcosa by Barclays and Evercore. Evercore also advised on the divestiture of the steel components business.
Legal advisory services for the acquisition were provided by Kirkland & Ellis while Gibson, Dunn & Crutcher advised on the divestiture.
Committed financing for the acquisition was secured by Arcosa with the assistance of J.P. Morgan, Bank of America Securities, and Barclays.
Baker Botts served as the legal advisor on the committed financing.
