REG - Breedon Group PLC - Acquisition

BreedonAnnouncement

05/03/2025 07:15

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RNS Number : 3525Z  Breedon Group PLC  05 March 2025

 

5 March 2025

 

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

BREEDON GROUP PLC

 

Acquisition of Lionmark for US$238 million

 

Earnings enhancing transaction to scale and diversify Breedon's US business

 

Breedon Group plc ("Breedon" or the "Group"), a leading vertically-integrated
construction materials group in Great Britain, Ireland and the United States,
announces the acquisition of Lionmark Construction Companies LLC ("Lionmark")
for an enterprise value of US$238m (£187m(1)) (the "Transaction").

 

Strategic Highlights

 

·      Lionmark is a leading Missouri headquartered construction
materials and surfacing solutions business with a focus on road infrastructure
end markets.

·      Expected to more than double Breedon's US revenue, increasing
vertical-integration and diversifying our US product offering into asphalt and
surfacing.

·      Benefits from attractive markets, with growing demand underpinned
by structural increases in transport infrastructure investment and Lionmark's
long-standing relationships with state transport authorities and large
contractors.

·      Strong cultural fit, high quality management team and a
complementary asset base facilitating a straightforward integration into BMC,
Breedon's existing US platform.

·      Transaction expected to provide immediate and attractive
financial returns while maintaining a strong and flexible balance sheet.

 

Financial Highlights

 

·      In the twelve months ended 30 November 2024, Lionmark recorded
unaudited revenue of US$246m and unaudited adjusted EBITDA(2) of US$31m.

·      Headline enterprise value represents c.7.7x 2024 unaudited
adjusted EBITDA(2).

·      Synergies of not less than US$3m per annum expected to be fully
delivered by the third year of ownership.

·      Asset backed with c.100 million tonnes(3) of reserves and
resources.

 

Transaction Highlights

 

·      c.US$226m payable in cash on completion, subject to customary
adjustments and retentions, funded through a draw down on Breedon's existing
Revolving Credit Facility.

·      c.US$12m payable in Breedon shares, to be retained by the Vendors
for a minimum of twelve months following Completion.

·      Completion is expected to occur by 7 March 2025; subject to
customary closing conditions

·      Expected to be immediately earnings enhancing(4); ROIC to cover
WACC by end of 2027.

·      Post-acquisition pro-forma Covenant Leverage for the Group of
c.1.9x(5); in line with our financial framework.

Andy Arnold, Managing Director, Breedon US, commented:

"The acquisition of Lionmark represents a significant milestone in the
development of our US business.  Lionmark is extremely complementary to our
existing operations, diversifying BMC's product to supply asphalt and
surfacing solutions into an attractive market which is well-positioned for
future growth."

 

Rob Wood, Chief Executive Officer, commented:

"The acquisition of Lionmark will more than double our US revenue, is expected
to be immediately earnings enhancing for shareholders while allowing Breedon
to maintain a conservative and flexible balance sheet to pay dividends and
make further bolt-on acquisitions across each of our platforms as
opportunities arise.

 

"In a year we have built a US business of scale that is already on a pro-forma
basis the equivalent size of our Irish business.  We are delighted to welcome
our new colleagues to Breedon and look forward to working with them as we
continue to expand Breedon's presence in the United States."

 

Notes:

1.      GBP: USD Exchange Rate of 1:1.27.

2.      Lionmark financials have been extracted from the management
accounts of Lionmark and adjusted for items which will not reoccur under
Breedon ownership.  Lionmark financials are unaudited and have been prepared
under US GAAP so may not be directly comparable to Breedon financials which
are prepared under IFRS.

3.      Breedon and Lionmark's best estimate of Lionmark's reserves and
resources at the date of this announcement, expressed as metric tonnes.

4.      This statement should not be construed as a profit forecast or
interpreted to mean that the future earnings per share, profits, margins or
cashflows of the Group will necessarily be greater than the historic published
figures.

5.      ROIC: post-tax return on average invested capital

6.      Pro-forma Covenant Leverage is the Covenant Leverage of the Group
calculated assuming the transaction had completed on 31 December 2024.
Covenant Leverage is defined as the ratio of Underlying EBITDA to Net Debt,
with both Underlying EBITDA and Net Debt amended to reflect the material items
which are adjusted by the Group and its lenders in determining leverage for
the purpose of assessing covenant compliance.

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018 (as amended).

 

 ENQUIRIES
 Breedon Group plc                                +44 (0) 1332 694010
 Rob Wood, Chief Executive Officer

 James Brotherton, Chief Financial Officer
 Louise Turner-Smith, Head of Investor Relations  +44 (0) 7860 911909
 MHP (Public relations adviser)                   +44 (0) 7595 461231
 Reg Hoare, Rachel Farrington, Charles Hirst      breedon@mhpgroup.com

 

About Breedon Group plc

Breedon Group plc, a leading vertically-integrated construction materials
group in Great Britain, Ireland and the United States delivers essential
products to the construction sector. Breedon holds 1.4bn tonnes of mineral
reserves and resources with long reserve life, supplying value-added products
and services, including specialty materials, surfacing and highway maintenance
operations, to a broad range of customers through its extensive local network
of quarries, ready-mixed concrete and asphalt plants.

The Group's two well-invested cement plants are actively engaged in a number
of carbon reduction practices, which include utilising alternative raw
materials and lower carbon fuels. Breedon's 4,500 colleagues embody our
commitment to 'Make a Material Difference' as the Group continues to execute
its strategy to create sustainable value for all stakeholders, delivering
growth through organic improvement and acquisition in the heavyside
construction materials market. Breedon shares (BREE) are traded on the Main
Market of the London Stock Exchange and are a constituent of the FTSE 250
index.

LEI: 213800DQGNQE3X76WS92

 

Additional information

 

Lionmark Overview

 

Founded in 1932 and headquartered in St Louis, Missouri, Lionmark is a leading
regional construction-materials and surfacing business with a particular focus
on road infrastructure end-markets.

 

In the twelve months ended 30 November 2024, Lionmark recorded unaudited
Revenue of US$246m and unaudited adjusted EBITDA of US$31m, derived from its
multi-state surfacing operations which are supported by eight quarries, four
asphalt plants and a bitumen import and processing facility, alongside c.400
colleagues.

 

During 2024, 72% of Lionmark's revenue arose in Missouri, 17% in Texas, 8% in
Arkansas and the remainder in the surrounding states.

 

Missouri, has the sixth largest road network in the US, with 213,000 miles of
highway of which c.90% are asphalt. Texas has the largest transportation
funding programme in the US, supported by a share of oil and gas production
taxes, with US$104bn of total transport infrastructure spend announced in 2024
over the next ten years.  More broadly, as at December 2024 only c.34% of the
committed c.US$375bn Federal IIJA highway investment had been deployed.

 

Lionmark has a strong order book for 2025 with a backlog of over US$210m, and
significant projects in the pipeline including upgrades to the I-70 and I-44
interstate highways, alongside routine construction and maintenance work.

 

Lionmark is owned by its senior operational management team (the "Vendors").
Following the transaction, the majority of the Vendors will remain with the
business.

 

 

Transaction Structure

 

Cash consideration of c.US$226m (£178m), subject to customary adjustments and
retentions, is being funded by way of a draw down under Breedon's existing
multicurrency RCF.

 

c.US$12m (£9.5m) is payable in the form of 2.1m Breedon shares (the "Shares")
to be issued to the Vendors, who have undertaken to retain all the Shares for
a minimum period of twelve months from completion. Application will be made in
due course for the Shares to be admitted to the Official List of the Financial
Conduct Authority and to trading on the Main Market of the London Stock
Exchange.

 

Completion is expected to occur by 7 March 2025; subject to customary closing
conditions.

 

The Transaction is expected to be immediately earnings enhancing.

 

Lewis Rice acted as legal adviser to Breedon on the transaction.

 

This announcement may include statements that are, or may be deemed to be,
"forward-looking statements" (including words such as "believe", "expect",
"estimate", "intend", "anticipate" and words of similar meaning). By their
nature, forward-looking statements involve risk and uncertainty since they
relate to future events and circumstances, and actual results may, and often
do, differ materially from any forward-looking statements. Any forward-looking
statements in this announcement reflect management's view with respect to
future events as at the date of this announcement. Save as required by
applicable law, Breedon undertakes no obligation to revise any forward-looking
statements in this announcement, whether following any change in its
expectations or to reflect events or circumstances after the date of this
announcement.

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