Argos and Summit Materials to combine US operations

Cementos Argos has agreed to combine its operations in the USA with Summit Materials Inc, aiming to create a leading building materials platform on national scale.

Cementos Argos (Grupo Argos) has entered into a definitive agreement with Summit Materials, under which they will combine their operations in the US to create a leading platform in the building materials industry. The agreement will have a component of stock consideration worth approximately US$2bn and cash payment of approximately US$1.2bn (subject to customary closing adjustments), resulting in a valuation of Argos North America of US$3.2bn or 10x EV/EBITDA 2023e or 12x EV/EBITDA LTM as of 2Q23. 

Summit Materials operates in more than 20 states in the US and Canada. It operates across aggregates, cement, concrete and other complementary businesses in the building materials industry, with assets that include 217 aggregate mines, two cement plants along the Mississippi River, and approximately 84 concrete plants. 

Argos North America Corp brings to the combination its four integrated cement plants, two grinding stations, 140 ready-mix concrete plants, and a complementary distribution network of eight maritime ports and 10 inland terminals. 

The new platform will have a diversified portfolio and a nationwide geographic presence in complementary markets and high-growth urban areas. The combination would create a company with combined proforma revenues over US$4bn and approximately US$1bn in EBITDA, including synergies. It would be the fourth-largest cement platform in the US, with an approximate capacity of 11.6Mta. The company would create the sixth-largest aggregates platform in the US, with reserves of over 5.5bnst and   sales of around 70Msta. The deal will also form one of the largest concrete producers, with more than 220 plants and more than 1800 mixers. 

"As a result, the combined company will have presence in 30 states, with a strong positioning in high growth markets, with complete vertical integration from quarries to end customer in many of them," claims Argos. "Having access to an extensive ports and terminal network will enable competitive imports of building materials to better serve customers by complementing domestic production."  

This combination unlocks estimated annual synergies of, at least, US$100m, with significant realisation within two years, derived from optimised sourcing, enhanced operational efficiencies, increased utilisation of the import terminals’ network, and an augmented asset base to increase the use of alternative fuels. Likewise, it leverages on a cement supply agreement from the Cartagena plant and enhances the ability to pursue attractive growth opportunities, both organic and inorganic, in current business lines and in others such as supplementary cementitious materials and new sources of aggregates.  

Juan Esteban Calle, CEO of Cementos Argos, stated: "This combination reaffirms our commitment to growth in the US market while realizing and optimising our intention to list the US business on the NYSE as the most efficient way to unlock the fundamental value of Cementos Argos' assets and businesses in that country. Being an active player in a publicly traded leading building materials platform, with a significant component of aggregates and cement on the world's most attractive market, is a pivotal step in the value generation strategy we launched months ago with the SPRINT program for the benefit of all our shareholders. Cementos Argos' participation in Summit Materials will continue to provide our shareholders with significant exposure to the US market."  

The transaction is expected to close in the first semester of 2024, subject to required regulatory approvals and customary closing conditions. JP Morgan Securities LLC is acting as lead financial advisor and Sullivan & Cromwell LLP is acting as legal counsel to Cementos Argos.