Mergers, acquisitions, musical chairs define back-to-back watershed years

Seven 2015–2016 deals mark the latest turning point in North American cement production and a key downstream segment, pipe and precast. Incumbent operators streamlined or broadened their market footprints while a newcomer from Mexico saw opportunity north of the Rio Grande. Two cement players’ deals realigned market leadership in concrete pipe and precast.

The Lafarge Group and Holcim Ltd. merger and attendant rise of CRH Cement Canada Group from Holcim (Canada), coupled with the proposed HeidelbergCement AG and Italcementi S.p.A. union, rocked 2015. Closing of the Lehigh Hanson Inc. and Essroc Cement Corp. parent merger, plus five smaller transactions, had similar effect in 2016.

The company impacting the U.S. cement and concrete market the most was Cemex S.A.B. de C.V., which scaled back assets from 2000–2007 acquisitions—Southdown Inc., RMC Group and Rinker Group—that made it an integrated powerhouse, especially across the Sunbelt. Through deals totaling about $1.2 billion, it unloaded a) cement production and distribution assets in Ohio, Kentucky, New Mexico and Texas, along with ready mixed concrete and building materials sites in the latter two states; and, b) the 32-plant Rinker Materials concrete pipe and precast business (note page 20).

The Texas and New Mexico plants, terminals and yards are natural bolt-ons for Mexico’s Grupo Cementos de Chihuahua and Denver-based GCC of America. The Ohio and Kentucky plant and terminals offer Eagle Materials a satellite to its Upper Midwest and Great Plains cement, aggregates and concrete platforms.

Cemex’s third asset disposal involved a less predictable suitor. Atlanta-based Quikrete Holdings agreed to acquire the Rinker Materials pipe and precast business in a $500 million-plus deal set to close this quarter. Outside its namesake business, Quikrete has demonstrated financial wherewithal and management expertise in recent years, assimilating Pavestone—the original top gun in concrete pavers, segmental retaining wall units and related hardscape units. The Rinker Materials purchase will follow closely on Quikrete’s merger with Contech Engineered Solutions, whose intellectual property includes Keystone Retaining Wall Systems and Con/Span Bridge Systems—strongly complementary brands to Pavestone and Rinker Materials. In packaged concrete, Quikrete was already a strong competitor to Oldcastle Architectural and its Sakrete franchise; Contech and Rinker Materials parallel that positioning against Oldcastle Precast.

Any talk of precast and concrete pipe in 2015-2016 starts with undisputed leader Forterra US Holdings. HeidelbergCement spun off the former Hanson Building Materials business in 2015. Assessing the national Hanson Pipe & Precast footprint, buyer Lone Star Fund XI wasted no time filling regional voids through deals for Cretex Concrete Products (Upper Midwest) and Sherman-Dixie Concrete Industries (Tennessee and Kentucky). The Dallas-based private equity specialist then established a comparable presence in ductile iron products by acquiring U.S. Pipe Inc. A fall 2016 initial public offering positioned Forterra with focus and strength unique among any concrete producer ever trading on Wall Street.

HeidelbergCement consummated the Italcementi takeover last July and August. The transaction was sealed with the sale of Essroc Cement’s Martinsburg, W.V., plant and eigth integrated terminals to a Federal Trade Commission-approved buyer, Argos USA. The deal marked the fifth in a 12-year U.S. development program yielding Colombia parent Cementos Argos cement and ready mixed concrete market positions from Texas to Florida to the Carolinas, and now points north and inland.

In a transaction with cement production and distribution capacity overlapping Argos’ newest assets, Mexico City-based Elementia Group capped 2016 acquiring Giant Cement Holdings (note page 24). The transaction fits the 21st century pattern of foreign companies’ U.S. cement plant pursuits, where European operators have mostly waned and their Latin America counterparts gained. As the sixth operator from Latin America staking a U.S. market claim, Elementia acquired Giant Cement from Cementos Portland Valderrivas, Madrid. An acquisition pipeline that used to run from Europe to the U.S. and Canada now has a companion stretching as far south as Brazil—home to Argos, Cemex, Elementia and GCC peer Votorantim Cementos.