– Provides Scaled Aggregates-Led Platform with Revenues of $283
Million, Adjusted EBITDA of $100 Million, and Margin Accretive to
Construction Products Segment
– Extends Footprint into Nation's Largest MSA
– Financing to Include New Long-Term Debt with Clear Path to
Deleveraging
– Additionally, Executed Definitive Agreement to Divest Steel
Components Business and Completed Sale of Other Non-Core Assets for
Total Consideration of $137 Million
– Transactions Accelerate Shift to Higher Margin Construction
Products While Advancing Strategy to Reduce Complexity and
Cyclicality of Overall Portfolio
– Arcosa Will Host a Conference Call to Discuss These
Transactions and Its Second Quarter 2024 Results at 8:30 AM ET on
Friday, August 2nd
Arcosa, Inc. (NYSE: ACA) (“Arcosa,” the “Company,” “We,” or
“Our”), a provider of infrastructure-related products and
solutions, today announced portfolio actions that advance the
Company's long-term strategy.
Acquisition of Stavola
Arcosa has entered into a definitive agreement to acquire the
construction materials business of Stavola Holding Corporation and
its affiliated entities ("Stavola") for $1.2 billion in cash,
subject to customary post-closing adjustments. Founded in 1948,
Stavola is an aggregates-led and vertically integrated construction
materials company primarily serving the New York-New Jersey
Metropolitan Statistical Area (“MSA”) through its network of five
hard rock natural aggregates quarries, twelve asphalt plants, and
three recycled aggregates sites. For the last twelve months ended
June 30, 2024 (“LTM”), Stavola generated revenues of $283 million
and Adjusted EBITDA of $100 million, representing a 35% Adjusted
EBITDA Margin. The aggregates business contributed 56% to Stavola’s
LTM Adjusted EBITDA. The structure of the transaction is expected
to create tax benefits attributable to Arcosa with a net present
value of approximately $125 million.
Commenting on the acquisition, Antonio Carrillo, Arcosa’s
President and Chief Executive Officer, noted, "Since becoming an
independent public company in 2018, Arcosa has successfully
executed against its long-term vision to grow in attractive markets
and reduce the complexity and cyclicality of the overall business
through strategic acquisitions and select divestitures. Over that
time, we have expanded our Construction Products business both
organically and inorganically, deploying approximately $1.5 billion
on value enhancing acquisitions to date and increasing our
aggregates presence in the top 50 MSAs.
“The acquisition of Stavola accelerates Arcosa’s strategic
transformation by adding a premier aggregates-led platform in the
nation’s largest MSA with favorable 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.”
Strategic Divestitures
Divestiture of Steel Components
Arcosa has also entered into a definitive agreement to sell its
steel components business to Stellex Capital Management LLC, a New
York-based private equity firm.
With a 150+ year legacy, Arcosa’s steel components business is a
leading supplier of railcar coupling devices, railcar axles, and
circular forgings. Based in Pennsylvania and operating under the
brands McConway & Torley, Standard Forged Products, and McKees
Rock Forgings, the business serves rail, mining, and other
infrastructure-related industries. Reported within the Company’s
Transportation Products segment, LTM revenues were $150 million for
the steel components business.
Additional Portfolio Actions
During the second quarter of 2024, the Company took additional
actions to optimize its portfolio and improve margins:
– Divested its single-location subscale asphalt and paving
operation located in Tennessee that was operating at a modest
loss
– Sold a non-operating facility within Engineered Structures
– Exited a small underperforming natural aggregates operation
serving the Permian Basin in west Texas and redeployed the
equipment.
Total consideration for the divestitures was $137 million, which
will be used to pay down debt.
Commenting on the portfolio actions, Carrillo continued,
"Today’s announcements underscore the strength of our company and
our confidence in the growth opportunities ahead of us.
Construction Products and Engineered Structures are benefitting
from increased scale and more resilient platforms and are
well-positioned to benefit from infrastructure-driven tailwinds.
Additionally, our two remaining cyclical businesses, wind towers
and barge, command industry-leading positions with solid backlog
visibility in place and anticipated multi-year market recoveries
underway.
“We have committed financing in place to fund the purchase of
Stavola that will result in initial net leverage above our targeted
range. Our permanent financing strategy will allow for rapid
deleveraging at an attractive cost of capital. Based on the
anticipated strength of our cash flow generation, our goal is to
return to our long-term net leverage targeted range within 18
months."
Carrillo concluded, “We believe these portfolio actions
underscore our commitment to increasing long-term shareholder value
and our disciplined approach to capital allocation. We look forward
to welcoming the Stavola team and customer base to Arcosa, and
express our gratitude to the employees of our steel components
business for their dedication and contributions to Arcosa.”
Strategic and Financial Rationale for Portfolio
Actions
– Extends Construction Products footprint into the nation’s
largest MSA with a scaled and vertically integrated aggregates and
FOB asphalt operation. Stavola operates in an attractive region
with increased exposure to lower volatility, infrastructure-led end
markets. Competitive advantages include a difficult to replicate
leadership position underpinned by long-term customer relationships
and an estimated 350 million tons of hard rock aggregates reserves
commanding industry-leading profitability metrics.
– Represents attractive valuation for a scaled aggregates-led
business with premium financial attributes. The $1.2 billion
purchase price reflects a 10.7x multiple of Stavola’s LTM Adjusted
EBITDA, net of the present value of tax attributes created from the
acquisition, and 12.0x on a gross basis.
– Increases Arcosa's exposure to higher margin Construction
Products Adjusted EBITDA. Stavola enhances the scale and margin
profile of our Construction Products segment. On a pro forma LTM
basis, Construction Products revenues increase 28% to $1.3 billion
and Adjusted Segment EBITDA grows 42% to $342 million, resulting in
260 basis points of Adjusted Segment EBITDA margin improvement.
– Reduces the complexity and cyclicality of the
portfolio. Divestiture of the steel components business, along
with the other recent strategic actions, results in reduced
exposure to cyclical end-markets and improved margin.
– Enhances Arcosa's overall profitability and financial
profile. Pro forma for the transactions, Construction Products
will represent 65% of Arcosa’s Adjusted EBITDA excluding corporate
costs, and the Company’s LTM Adjusted EBITDA Margin expands
approximately 220 basis points. Today’s announcements are decisive
actions to optimize our portfolio, enhance the quality of our
earnings, and deliver superior value for our shareholders.
– Portfolio resilience supports Arcosa’s ability to maintain
a healthy balance sheet through prudent deleveraging. Upon
completion of the acquisition of Stavola, the Company’s pro forma
LTM Net Debt to Adjusted EBITDA is approximately 3.7x. The
increased scale of our growth businesses and anticipated market
recovery in our cyclical businesses, bolstered by current backlog
visibility, gives us line of sight to increased cash flow
generation. With debt reduction as our near-term capital allocation
priority, our goal is to de-lever to our long-term target of 2.0 to
2.5x within 18 months.
Financing
Arcosa has obtained $1.2 billion of committed secured bridge
loan financing in connection with the execution of the agreement to
acquire Stavola, as well as a backstop to its existing $600 million
revolving credit facility. Prior to the transaction close, the
Company anticipates accessing the long-term debt capital markets
for permanent financing with a mix of secured and unsecured debt
that incorporates prepayment flexibility.
Approvals and Timing
The actions announced today have been unanimously approved by
the Company’s Board of Directors. Arcosa has obtained all necessary
regulatory approvals for the acquisition of Stavola and the
divestiture of the steel components business. The Company
anticipates the acquisition will be completed in the fourth quarter
and the divestiture is expected to close during the third
quarter.
Advisors
Barclays and Evercore served as financial advisors to Arcosa on
the acquisition of Stavola. Evercore also served as financial
advisor to Arcosa on the divestiture of the steel components
business. Kirkland & Ellis served as legal advisor to the
Company on the acquisition, and Gibson, Dunn, & Crutcher served
as legal advisor to Arcosa on the divestiture. J.P. Morgan, Bank of
America Securities and Barclays have provided committed financing
to Arcosa in connection with the acquisition of Stavola. Baker
Botts served as the Company’s legal advisor on the committed
financing.
Conference Call Details
A conference call is scheduled for 8:30 a.m. Eastern Time on
August 2, 2024 to discuss the transactions and our second quarter
2024 results announced today in a separate release. To listen to
the conference call webcast, please visit the Investor Relations
section of Arcosa’s website at https://ir.arcosa.com. A slide
presentation for this conference call will be posted on the
Company’s website in advance of the call at https://ir.arcosa.com.
The audio conference call number is 800-343-1703 for domestic
callers and 785-424-1116 for international callers. The conference
ID is ARCOSA and the passcode is 24246. An audio playback will be
available through 11:59 p.m. Eastern Time on August 16, 2024, by
dialing 800-839-1162 for domestic callers and 402-220-0398 for
international callers. A replay of the webcast will be available
for one year on Arcosa’s website at
https://ir.arcosa.com/news-events/events-presentations.
About Arcosa
Arcosa, Inc., headquartered in Dallas, Texas, is a provider of
infrastructure-related products and solutions with leading
positions in construction, engineered structures, and
transportation markets. Arcosa reports its financial results in
three principal business segments: Construction Products,
Engineered Structures, and Transportation Products. 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,” “strategy,” “plans,” “goal,”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
failure to successfully complete and integrate acquisitions,
including Ameron and Stavola, or divest any business, including the
steel components business, or failure to achieve the expected
benefits of acquisitions or divestitures; 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; ability to improve margins; the impact of inflation and
costs of materials; assumptions regarding achievements of the
expected benefits from the Inflation Reduction Act; the delivery or
satisfaction of any backlog or firm orders; the impact of pandemics
on Arcosa’s business; 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, 2023 and as may be revised and
updated by Arcosa's Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
TABLES TO FOLLOW
Reconciliation of Stavola and Steel Components Adjusted
EBITDA (in millions) (unaudited)
“EBITDA” is defined as net income plus interest, taxes,
depreciation, depletion, and amortization. “Adjusted EBITDA” is
defined as EBITDA adjusted for certain items that are not
reflective of normal earnings. GAAP does not define EBITDA or
Adjusted EBITDA and they should not be considered as alternatives
to earnings measures defined by GAAP, including net income. We
believe Adjusted EBITDA assists investors in comparing a company's
performance on a consistent basis without regard to depreciation,
depletion, amortization, and other items which can vary
significantly depending on many factors.
Twelve Months Ended
June 30, 2024
Stavola:
Net income
$
71.8
Add:
Interest expense, net
0.8
Provision for income taxes
—
Depreciation, depletion, and amortization
expense
18.9
EBITDA
91.5
Non-recurring adjustments
9.0
Stavola Adjusted EBITDA
$
100.5
Twelve Months Ended
June 30, 2024
Steel components business:
Operating profit
$
11.3
Add: Depreciation and amortization
9.6
Steel components EBITDA
20.9
Steel components Adjusted EBITDA
$
20.9
Reconciliation of Net Debt to Adjusted EBITDA ($ in
millions) (unaudited)
GAAP does not define “Net Debt” and it should not be considered
as an alternative to cash flow or liquidity measures defined by
GAAP. The Company uses Net Debt, which it defines as total debt
minus cash and cash equivalents to determine the extent to which
the Company’s outstanding debt obligations would be satisfied by
its cash and cash equivalents on hand. The Company also uses “Net
Debt to Adjusted EBITDA”, which it defines as Net Debt divided by
Adjusted EBITDA for the trailing twelve months as a metric of its
current leverage position. We present this metric for the
convenience of investors who use such metrics in their analysis and
for shareholders who need to understand the metrics we use to
assess performance and monitor our cash and liquidity
positions.
June 30, 2024(1)
Pro forma Stavola
Pro forma June 30,
2024
Total Debt, excluding debt issuance
costs
$
710.4
$
1,200.0
$
1,910.4
Cash and cash equivalents
103.7
—
103.7
Net Debt
$
606.7
$
1,200.0
$
1,806.7
Adjusted EBITDA (last twelve
months)(1)
$
393.3
$
100.5
$
493.8
Net Debt to Adjusted EBITDA
1.5
3.7
(1) See separate press release announcing
Arcosa's second quarter 2024 earnings results.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240801867077/en/
INVESTOR CONTACTS
Gail M. Peck Chief Financial Officer
Erin Drabek Director of Investor Relations
T 972.942.6500 InvestorResources@arcosa.com
David Gold ADVISIRY Partners
T 212.661.2220 David.Gold@advisiry.com
MEDIA CONTACT
Media@arcosa.com
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