Breedon expands its UK operations

This week Breedon Group Plc announced that it had entered into a conditional agreement to acquire Lagan Group (Holdings) Ltd for GBP455m. While the aim is to create a leading independent construction materials group in the UK and Ireland, this move will provide the group with a platform to establish further organic growth and bolt-on acquisitions.

The acquisition is expected to give Breedon annual cost savings of approximately GBP5m by the third full year following completion.

The acquisition strengthens the group's cement division
Pat Ward, Breedon's Group CEO, said: "Lagan represents a unique opportunity to enter a growing market with immediate scale and excellent opportunities for expansion. It significantly strengthens our cement offer, adds to our mineral and downstream resources, brings us a bitumen import/export business and adds real weight to our contract surfacing operations.

"Lagan is well-run, well-invested, with an experienced management team and a strong track record. Its culture is complementary to our own, with a sharp focus on customer service, a first-class workforce and a commitment to safety, which is a key priority for us.

"From a strategic perspective, it provides us with a stronger platform from which to pursue further organic growth and bolt-on acquisitions."
  
At present, Breedon operates a cement plant, around 60 quarries, 26 asphalt plants, nearly 200 ready-mixed concrete and mortar plants as well as four concrete products plants nationwide, employing around 2200 people. The company also has around 750Mt of mineral reserves.

The new enlarged group
The enlarged group will include: two cement manufacturing plants, 69 quarries, 39 asphalt plants, approximately 200 ready-mixed concrete and mortar plants, six import/export terminals, eight rail-fed depots and four contract surfacing businesses. The group says that the acquisition provides a range of complementary products and services that will enable Breedon to strengthen its core product offering.

In addition to aggregates, asphalt, ready-mixed concrete and bitumen, Lagan adds bricks, a range of concrete and clay products and Welsh slate to Breedon's existing portfolio. Lagan also brings with it a substantial contract surfacing and road maintenance business which will significantly increase the scale of Breedon's existing contract surfacing operations and enable the enlarged group to provide solutions to larger surfacing and road maintenance projects. 

Lagan adds a modern 0.7Mta cement plant in Kinnegad (Co Meath), nine active quarries, 13 asphalt plants and nine ready-mixed concrete plants. The Kinnegad plant began production in 2002.

Bolt-on acquisitions
A key part in Breedon's successful strategy has been to make bolt-on acquisitions in strategic parts of the UK market. In 2017, the group invested around GBP10m in acquisitions and since 2010 it has invested GBP525m in M&A activity. In addition, the group has spent GBP150m on capital expenditure over the last seven years.

Hope Cement plant
The cement division currently accounts for 20 per cent of the group's revenue and the Hope Cement works in Derbyshire lies at the heart of the division. The Hope cement plant underwent significant renovation in 2017. The facility received upgrades to the preheater riser, kiln feed and rail line in 2017, while the limestone quarry has a new excavator.

Future plans include the acceleration of the shale replacement project, sourcing increased quantities of pulverised fuel ash (pfa) as a shale substitute by 2019.

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