$446M Lafarge NA asset deal yields Eagle Materials Great Plains platform

Sources: Eagle Materials Inc., Dallas; Lafarge Group, Paris; CP staff

By Don Marsh

Eagle Materials is projecting a November or December closing on Lafarge North America properties in Kansas, Missouri, Nebraska and Oklahoma: eight ready mixed concrete plants, two aggregate quarries plus a fly ash distribution business strategic to Kansas City; Sugar Creek, Mo., and Tulsa, Okla., cement mills; and six cement terminals in the four states. In the 12 months leading up to June 30, 2012, the operations logged $178 million in revenue.

The $446 million transaction increases Eagle’s cement capacity by 1.6 million tons—about 60 percent—and positions it with an integrated powder, aggregate and ready mixed business in Kansas City. The producer has existing integrated operations in central Texas and northern California. Its cement portfolio spans Illinois, Nevada, Texas and Wyoming mills, plus California, Colorado, Nebraska, Texas, Utah and Wyoming terminals.

“Our stated strategy has been to grow the cement and aggregates side of our business. Our first priority has been to acquire cement plants that connect but do not overlap with the market reach of our existing plants,” says Eagle Materials CEO Steven Rowley. “These two high-quality Lafarge cement plants are a compelling fit with our objectives—and the transaction meets our stringent criteria for new investment.

“These assets will allow us to participate more fully in the U.S. construction industry recovery; additionally this transaction further positions the company near energy markets where there is growing demand for our specialty oil well cement along with our newly-offered high-quality northern white frac sand.” The new assets will immediately contribute earnings and cash flow for stockholders, he adds, while  providing significant near-term opportunities for operating synergies and earnings growth.

The transaction calls for a transition sales agreement where Eagle will supply certain Lafarge operations with cement for four to five years, and an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations.

The Eagle deal is the third in 18 months to see Lafarge NA retreat from a major integrated cement and ready mixed position. In May 2011, it announced a $760 million sale of Southeast businesses to Argos USA. Five months later, it effected an asset swap—plus undisclosed cash considerations—netting Martin Marietta Materials the Denver-based Front Range ready mixed and aggregate businesses. Following the Eagle transaction, Lafarge NA will have nine cement milling or grinding operations representing 11 million tons’ annual capacity; strong regional aggregate and ready mixed businesses in markets including New York, Maryland and Louisiana; and, commanding positions across Canada.