6 March 2024
NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO
DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE
INFORMATION
BREEDON GROUP
PLC
Acquisition of BMC
Enterprises Inc. for US$300 million
Earnings enhancing US entry;
launching Breedon's scalable third platform
Breedon Group plc ("Breedon" or the
"Group"), a leading vertically-integrated construction materials
group in Great Britain and Ireland, announces the acquisition of
BMC Enterprises Inc. ("BMC") for an enterprise value of US$300m
(£238.1m1) (the "Transaction").
Strategic Highlights
· BMC is a supplier of ready-mixed concrete, aggregates and
building products headquartered in St Louis, Missouri with a strong
track record of both organic and transactional growth
· Compelling opportunity to launch a scalable third platform for
Breedon in the fragmented and growing US construction materials
market
· Underpinned by highly attractive, established business with
excellent margins
· Well regarded and experienced management team with long track
record who will remain with the business
· Transaction expected to provide attractive financial returns
while maintaining a strong balance sheet
Financial Highlights
· In the twelve months ended 31 October 2023, BMC recorded
unaudited Revenue of US$178.9m and unaudited adjusted EBITDA of
US$35.5m2
· Headline enterprise value represents c.8.5x 2023 unaudited
adjusted EBITDA
· Since 2013 BMC has delivered CAGR Revenue and adjusted EBITDA
growth of c.12% and c.22% respectively through organic growth and
bolt-on acquisitions
· BMC has over 400 million tonnes3 of reserves and
resources
Transaction Highlights
·
c.US$285m 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$15m payable in Breedon shares, to be retained
by the Vendor for a minimum of twelve months following
Completion
·
Completion is expected to occur by 7 March 2024;
subject to customary closing conditions
·
Expected to be earnings enhancing in the first
full year of ownership4
·
Post-acquisition Pro Forma Covenant Leverage for
the Group of c.1.4x5; enabling flexibility for dividends
and future bolt-on acquisitions across each of our
platforms
Rob Wood, Chief Executive Officer,
commented:
"The acquisition of BMC represents a
compelling opportunity for Breedon to launch our third platform in
the USA. BMC has an excellent performance track record over a
sustained period and is positioned in an attractive market for
future growth.
"As a high-quality aggregates and
concrete business that has grown at pace, organically and through
acquisitions, with a strong management team and deep local
knowledge, BMC's culture and values are fully aligned with the
Breedon business model.
"The acquisition is expected to be
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.
"We are delighted to welcome our BMC
colleagues to Breedon and look forward to working with them to
build Breedon's presence in the USA."
Notes:
1. GBP: USD
Exchange Rate of 1: 1.26
2. BMC
financials have been extracted from the management accounts of BMC
and adjusted for items which will not reoccur under Breedon
ownership. BMC 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
BMC's best estimate of BMC'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. Pro Forma
Covenant Leverage is the ratio of the Group's Underlying EBITDA to
Net Debt calculated assuming that the transaction had completed on
31 December 2023. Covenant Leverage is used in determining
compliance with the Group's banking covenants.
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
|
Moelis (Financial adviser to Breedon)
|
+44 (0) 20
7634 3500
|
Mark Aedy, Chris Raff, Andrew
Welby
|
|
|
|
MHP
(Public relations adviser)
|
+44 (0) 20
3128 8100
|
Reg Hoare, Rachel Farrington,
Charles Hirst
|
breedon@mhpgroup.com
|
Breedon Group plc, a leading
vertically-integrated construction materials group in Great Britain
and Ireland, delivers essential products to the construction
sector. Breedon holds 1bn 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 3,900 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.
Additional information
BMC Overview
Founded in 1925 and headquartered in
St Louis, Missouri, BMC is a leading regional ready-mixed concrete,
aggregates and building products business with a diverse range of
end customers and markets.
BMC has a strong track record of
organic and transaction led growth, with a 10 year revenue and
EBITDA CAGR of 12% and 22% respectively, and an EBITDA margin of
c.20%. BMC had unaudited gross assets as at 31 October 2023 of
US$168.2m (£133.5m), recorded unaudited Revenue of US$178.9m
(£142.0m) and unaudited adjusted EBITDA for the twelve months
ending 31 October 2023 of US$35.5m (£28.2m).
BMC operates 5 hardstone quarries, 7
sand and gravel facilities (including river dredging operations),
44 ready-mixed concrete plants and 9 building products facilities.
The business is predominantly located in Missouri, with further
operations in Illinois and Arkansas and employs c.570 colleagues.
BMC's end market exposure is estimated to be c.50%
residential, c.25% commercial and c.25% infrastructure with a
diverse range of customers. In the last decade BMC has successfully
completed over 20 bolt-on acquisitions.
Missouri is expected to see
significant inward investment in future years assisted by the
Infrastructure Investment & Jobs Act, the CHIPS and Science Act
and the Inflation Reduction Act.
The US remains a large and
fragmented construction materials market that offers attractive
prospects, in line with Breedon's rigorous investment criteria. The
cultural and regulatory profile matches our home markets, playing
to our experience and strong track record of acquisition
integration.
BMC is owned by its President and
CEO, Nathan McKean, and entities closely associated with him.
On completion, Nathan McKean will transition to a
non-executive advisory role to Breedon's North America business,
providing the Group with the continued benefit of his significant
sector and country experience.
The wider BMC management team will
remain with the business including Andy Arnold (Chief Operating
Officer), John Crumrine (Chief Financial Officer) and Mark Jacobs
(Chief HR Officer). On completion, Andy Arnold will be
appointed CEO of BMC.
Transaction Structure
Cash consideration of c.US$285m
(£226.2m), subject to customary adjustments and retentions, is
being funded by way of a draw down under Breedon's existing
multicurrency RCF.
c.US$15m (£11.9m) is payable in the
form of 3,199,915 Breedon shares (the "Shares") to be issued to the
vendor, Nathan McKean, who has 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
premium listing segment of 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 2024; subject to customary closing conditions.
The Transaction is expected to be
earnings enhancing in the first full year of ownership. The Group
intends to maintain a conservative balance sheet to provide
flexibility for dividends and future bolt-on acquisitions across
each of the Group's platforms.
Breedon believes the Transaction
represents a compelling opportunity for Breedon to launch our third
platform in the USA. BMC has an excellent performance track
record over a number of years and is well positioned in an
attractive market for future growth.
Moelis and Company UK LLP ("Moelis")
is acting as exclusive financial advisor to Breedon Group plc in
relation to the acquisition of BMC and no-one else and will not be
responsible to anyone other than Breedon Group plc for providing
the protections offered to clients of Moelis or for providing
advice in relation to the acquisition of BMC.
Morrison & Foerster 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.