Quikrete’s biggest, best bet yet: Forterra

Quikrete Holdings Inc. continues one of the most impressive deal making streaks to date for a private North American construction materials player. After making a name in hardware stores and lumberyards, then evolving plant footprint and stockkeeping unit offerings for big box home improvement retailing, the producer has reached deep into engineered or specified construction.

In less than five years, Atlanta-based Quikrete Holdings has closed or secured transactions approaching $5 billion by our estimates. Leading into five 2017-2021 acquisitions, it gained a strong foothold in concrete hardscapes with a deal for Pavestone, whose 1990s growth paced compounding paver, segmental retaining wall unit and packaged materials throughput of Home Depot and Lowe’s stores. Pavestone positioned Quikrete Holdings to answer the distribution efficiency of hardscape and conventional concrete masonry units—coupled with packaged concrete and landscape material loads—proved in Oldcastle APG block, paver and Sakrete packaging operations. Quikrete Holdings significantly scaled its concrete masonry building and hardscape presence in subsequent deals for Argos USA and Boral North America block operations in Florida and Texas. The 2019 acquisition of Missouri-based Midwest Products Group, one of the premier independents in concrete and clay unit production or distribution, served as an exclamation point.

In tandem with growing a strong counterpart to Oldcastle APG, Quikrete Holdings added Contech Engineered Solutions, the Ohio-based producer of concrete and steel drainage structures and owner of the premier concrete hardscape brand: Keystone Retaining Wall Systems. Contech set the stage for Quikrete Holdings to grow a separate business matching Oldcastle Infrastructure on key product fronts, as did a $500 million deal with Cemex USA for the Rinker Materials pipe and precast business.

Ambitious on its own, the Rinker Materials move was a prelude to a $2.7 billion buyout of Texas-based Forterra Inc., announced late last month. Quikrete Holdings has a unique affinity with its latest target. Forterra’s drainage and water supply infrastructure product portfolio took shape with a whirlwind of 2016-2017 acquisitions. After a 2015 launch as a HeidelbergCement AG spinoff of Hanson Building Materials America, Forterra pursued a roll up strategy with bolt-on deals, then nearly doubled in size by acquiring U.S. Pipe, the leader in ductile iron product for water distribution.

Principals project a fourth quarter closing on a transaction in which Quikrete Holdings will acquire all outstanding Forterra debt and NYSE-traded shares. Forterra directors unanimously approved a $24/share offer, representing a 38.5 percent premium to the company’s 90-day volume-weighted average stock price through mid-February. The top shareholder, a Lone Star Funds affiliate with a 53 percent stake, blessed the Quikrete overture by written consent.

Subject to regulatory approvals, the deal has the potential to bring under one roof the top two players in manufactured concrete drainage structures— integrating assets that have evolved from (pre-Quikrete) Hydro Conduit and Rinker Materials, (pre-Forterra) Hanson Pipe & Precast, and (post-Hanson) Cretex, Sherman-Dixie and U.S. Pipe businesses.

“We admire Quikrete’s impressive 80-year history and commitment to delivering superior service and products,” said Forterra CEO Karl Watson Jr., whose perspective on mergers & acquisitions is informed by tours of duty in the C-suites of Rinker Materials, Cemex USA and Summit Materials. “We look forward to working with Quikrete to build on our positive momentum and achieve even greater success.”

“Forterra and Quikrete are an ideal strategic fit, and this combination is a natural next step, enabling us to better serve our customers across the company on their concrete projects from start to finish,” added Quikrete Holdings CEO Will Magill. “We are excited to grow our capabilities in the potable water distribution market through Forterra’s well-respected U.S. Pipe business … and bring two great companies together.”

A knack for bringing many acquired companies and their concrete or construction plants together in short order has enabled Quikrete Holdings to cultivate brand recognition far beyond a supplier synonymous with packaged dry mix and post holes.