Adelaide Brighton downstream acquisitions, Australia

Adelaide Brighton Ltd has acquired two integrated aggregates and readymix concrete businesses, one in South Australia and the second in Queensland, progressing its long-term vertical integration strategy of buying downstream construction materials businesses.
 
In South Australia, in addition to the recently announced Penrice quarry acquisition, Adelaide Brighton has entered into a contract to purchase Direct Mix Concrete and Southern Quarries (DMC), the largest independent aggregates and readymixed concrete supplier to the Adelaide building, construction and infrastructure market. DMC operates 13 concrete plants under its Direct Mix brand and operates a significant hard rock quarry and sand operations under its Southern Quarries brand.

In Queensland, the company has purchased the concrete, quarry, sand, transport and cement operations of Townsville based BM Webb Construction Materials (Webb). The operations are located in and around Townsville, and include a concrete plant, a limestone quarry, cement operation (importing bulker bagged GP cement and fly ash), a sand reserve and transport operations. The business currently produces approximately 60,000m3 of concrete per annum and has hard rock reserves in excess of 50 years as well as significant sand reserves. The acquisition provides the opportunity for Adelaide Brighton to expand its cement distribution into the north Queensland market – a market in which it did not participate prior to the Webb acquisition.

Adelaide Brighton CEO Martin Brydon said the acquisitions, which will add to earnings per share from FY14, significantly strengthened the company’s position in the South Australian market and gave it an important staging post for cement distribution in north Queensland.

“The DMC business provides a large scale entry into the market as it is the number two player in South Australian concrete, hard rock and sand. DMC also offers a well located hard rock quarry resource with more than 50 years of reserves, protects the sales of cement supplied by Adelaide Brighton and provides overhead synergy benefits,” Mr Brydon said.

“The Penrice Quarry acquisition secures long term reserves of high quality industrial minerals and aggregates in excess of 30 years and complements the DMC market position.”

“The Webb acquisition offers the opportunity to expand into the promising north Queensland market now we have the ability to distribute cement into this market.”

The total purchase price of A$174m, including related transaction costs, represents an anticipated year one EV/EBITDA multiple of 9.8x. The DMC transaction is expected to be completed in August 2014 while the smaller Webb transaction was completed in May 2014.

Mr Brydon said the acquisitions follow the company’s recently completed A$112m investment program to improve capacity, efficiency and sustainability in the Cement and Lime division and recent downstream acquisitions which have established a strong market position in the eastern states in concrete and aggregates.

The acquisitions will be funded with existing cash and available facilities.