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Arcosa Acquires Stavola for $1.2B, Divests Steel Components Business
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Arcosa, Inc. (ACA - Free Report) recently acquired the construction materials business of Stavola Holding Corporation and its affiliated entities (Stavola) for $1.2 billion.
This apart, ACA completed the previously announced sale of its steel components business on Aug. 16, 2024.
Buyout Synergies
The acquisition was funded with a $600 million 6.875% Senior Note issuance (due 2032), which closed on Aug. 26, 2024, and a pre-payable $700 million variable-rate senior secured Term Loan B Facility (due 2031), which was funded concurrently with the closing of the transaction. Excess cash proceeds will be used to pay down borrowings on the company’s revolving credit facility.
For third-quarter 2024, the company expects adjusted EBITDA to be within $1-$1.5 million loss, reflecting a partial period of ownership that was impacted by the deferral of certain product shipments and business interruption from actions necessary to complete the divestiture process. Moreover, Arcosa plans to update its 2024 revenue and adjusted EBITDA guidance for the completion of these transactions at third-quarter earnings release.
The company anticipates deploying strong free cash flow to return to its net leverage target of 2.0-2.5X within 18 months.
About Stavola
Founded in 1948, Stavola is an aggregates-led and vertically integrated construction materials company. It primarily serves the New York-New Jersey Metropolitan Statistical Area (MSA) through its network of five hard rock natural aggregates quarries, 12 asphalt plants and three recycled aggregates sites.
In the past 12 months (ended June 30, 2024), Stavola generated revenues of $283 million and adjusted EBITDA of $100 million, representing an adjusted EBITDA margin of 35%. Of the total adjusted EBITDA, 56% was contributed by the aggregates business. This is expected to create tax benefits attributable to Arcosa with a net present value of nearly $125 million.
Antonio Carrillo, president and chief executive officer of ACA, stated, “These transactions significantly advance our strategy of growing in attractive markets while reducing the cyclicality and complexity of our overall portfolio. Stavola underscores our aggregates-led acquisition strategy, expanding our platform into the nation’s largest MSA with industry-leading financial attributes.”
ACA’s Stock Performance
Shares of this Zacks Rank #3 (Hold) company have soared 11.6% in the past six months compared with the Zacks Building Products - Miscellaneous industry’s 6.6% growth. Solid contributions from its Construction Products and Engineered Structures segments boosted growth. A boost in infrastructural and public construction spending, along with a renewable energy drive, should improve Arcosa’s growth.
Image Source: Zacks Investment Research
Arcosa strategically pursued two acquisitions in the first half of 2024, significantly bolstering its performance. In August, the company entered into a deal with an affiliate of Stellex Capital Management, a middle-market private equity firm, to sell its McConway & Torley and Standard Forged Products businesses.
These inorganic moves align with Arcosa's long-term growth strategy, aiming to capitalize on opportunities in key markets and sectors. As the company continues to integrate these acquisitions, it anticipates further synergies and operational efficiencies, thus driving value for shareholders.
In a nutshell, Arcosa's strategic acquisitions have positioned it for sustained growth and market leadership in the construction products sector, underscoring its commitment to delivering innovative solutions and creating value for stakeholders.
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Arcosa Acquires Stavola for $1.2B, Divests Steel Components Business
Arcosa, Inc. (ACA - Free Report) recently acquired the construction materials business of Stavola Holding Corporation and its affiliated entities (Stavola) for $1.2 billion.
This apart, ACA completed the previously announced sale of its steel components business on Aug. 16, 2024.
Buyout Synergies
The acquisition was funded with a $600 million 6.875% Senior Note issuance (due 2032), which closed on Aug. 26, 2024, and a pre-payable $700 million variable-rate senior secured Term Loan B Facility (due 2031), which was funded concurrently with the closing of the transaction. Excess cash proceeds will be used to pay down borrowings on the company’s revolving credit facility.
For third-quarter 2024, the company expects adjusted EBITDA to be within $1-$1.5 million loss, reflecting a partial period of ownership that was impacted by the deferral of certain product shipments and business interruption from actions necessary to complete the divestiture process. Moreover, Arcosa plans to update its 2024 revenue and adjusted EBITDA guidance for the completion of these transactions at third-quarter earnings release.
The company anticipates deploying strong free cash flow to return to its net leverage target of 2.0-2.5X within 18 months.
About Stavola
Founded in 1948, Stavola is an aggregates-led and vertically integrated construction materials company. It primarily serves the New York-New Jersey Metropolitan Statistical Area (MSA) through its network of five hard rock natural aggregates quarries, 12 asphalt plants and three recycled aggregates sites.
In the past 12 months (ended June 30, 2024), Stavola generated revenues of $283 million and adjusted EBITDA of $100 million, representing an adjusted EBITDA margin of 35%. Of the total adjusted EBITDA, 56% was contributed by the aggregates business. This is expected to create tax benefits attributable to Arcosa with a net present value of nearly $125 million.
Antonio Carrillo, president and chief executive officer of ACA, stated, “These transactions significantly advance our strategy of growing in attractive markets while reducing the cyclicality and complexity of our overall portfolio. Stavola underscores our aggregates-led acquisition strategy, expanding our platform into the nation’s largest MSA with industry-leading financial attributes.”
ACA’s Stock Performance
Shares of this Zacks Rank #3 (Hold) company have soared 11.6% in the past six months compared with the Zacks Building Products - Miscellaneous industry’s 6.6% growth. Solid contributions from its Construction Products and Engineered Structures segments boosted growth. A boost in infrastructural and public construction spending, along with a renewable energy drive, should improve Arcosa’s growth.
Image Source: Zacks Investment Research
Arcosa strategically pursued two acquisitions in the first half of 2024, significantly bolstering its performance. In August, the company entered into a deal with an affiliate of Stellex Capital Management, a middle-market private equity firm, to sell its McConway & Torley and Standard Forged Products businesses.
These inorganic moves align with Arcosa's long-term growth strategy, aiming to capitalize on opportunities in key markets and sectors. As the company continues to integrate these acquisitions, it anticipates further synergies and operational efficiencies, thus driving value for shareholders.
In a nutshell, Arcosa's strategic acquisitions have positioned it for sustained growth and market leadership in the construction products sector, underscoring its commitment to delivering innovative solutions and creating value for stakeholders.
Key Picks
Latham Group, Inc. (SWIM - Free Report) : Based in Latham, NY, the company stands as the leading designer, manufacturer and marketer of in-ground residential swimming pools and pool accessories. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SWIM has seen an upward estimate revision for 2024 earnings per share (EPS) to 13 cents from break-even over the past 60 days. The estimated figure indicates 750% year-over-year growth.
Armstrong World Industries, Inc. (AWI - Free Report) : Based in Lancaster, PA, Armstrong World is a leading global manufacturer of ceiling systems primarily for commercial, institutional and residential building construction and renovation. It presently carries a Zacks Rank #2 (Buy).
AWI has seen an upward estimate revision for 2024 EPS to $6.07 from $6.02 over the past 60 days. The estimated figure indicates 14.1% year-over-year growth.
Frontdoor, Inc. (FTDR - Free Report) : Based in Memphis, TN, this company provides home warranties in the United States. It presently carries a Zacks Rank of 2.
FTDR has seen an upward estimate revision for 2024 EPS to $2.79 from $2.64 over the past 60 days. The estimated figure indicates 21.3% year-over-year growth.