MDU Resources Board sets 2023 Knife River Corp. spin off

Sources: MDU Resources Group, Bismarck, N.D.; CP staff

MDU Directors have unanimously approved a plan to separate the Knife River Corp. construction materials business from the namesake power utility and related construction services flagship, both maintaining North Dakota headquarters. Knife River has 1 billion-plus tons of aggregate reserves, 110 ready mixed concrete and 50 asphalt plants, plus 410,000 tons of liquid asphalt and cement storage capacity. Operations are concentrated in Upper Midwest, Southwest, West and Pacific Northwest markets. In the past four years, the producer has completed 12 acquisitions and increased revenues by nearly one quarter. 

A tax-free spinoff of Knife River shares will net “two independent, publicly traded and well-capitalized companies, each positioned for durable growth and shareholder value creation.” Scheduled for completion next year, the separation is expected to have a number of benefits for MDU Resources and Knife River stakeholders: 

• Enhanced strategic focus. Each company will be able to pursue individualized strategies specific to the industries in which it operates, and use equity tailored to its own business to enhance acquisition programs, retention and hiring.

• Optimized capital structures. Each company will benefit from a distinct capital structure and financial policies tailored to its separate business profile and needs.

• Tailored capital allocation strategies. Each company will have enhanced flexibility to deploy capital toward its specific growth opportunities.

• Distinct investment opportunities. Investors will be able to better assess the value of the two companies based on respective MDU and Knife River operational and financial characteristics.

“We are taking an important step to significantly enhance the value inherent in our businesses by creating two focused, independent, publicly traded companies,” says MDU CEO David Goodin. “We are proud of the strong businesses we have built and are confident now is the right time to take this step to best serve our customers, employees, communities and shareholders.” The proven MDU Resources and Knife River management teams will be able to more directly focus resources and capital to achieve their respective strategic goals, he adds. 

“We expect this transaction to create significant value for our shareholders and believe it will enable us to achieve attractive shareholder returns at both companies,” observes MDU Resources Chair Dennis Johnson. “The board regularly assesses MDU Resources’ business, operations and value creation opportunities. Our most recent assessment determined that a separation of Knife River could unlock significant value. Since its first aggregate company acquisition in 1992, MDU Resources has built Knife River into a leading aggregates-based construction materials business. The board believes Knife River is ready to continue its success as a stand-alone public company and take full advantage of anticipated work resulting from federal infrastructure funding. We will diligently work through the separation process to ensure each company is optimized to deliver value for shareholders.”

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Vulcan Materials Co. has acquired Syar Industries LLC, one of northern California’s largest independent concrete, asphalt, aggregate and recycled materials producers. FMI Capital Advisors of Raleigh, N.C. served as the Napa-based operator’s exclusive financial advisor. 

“Working with the team at FMI, we were able to find the best strategic fit and obtain a fair valuation during the sale process,” says President Jim Syar. “We were pleased with the attention to detail and client service, and we’re excited to see the integration [with] Vulcan.”

Syar Industries has nine ready mixed and six asphalt plants, two quarries, two sand & gravel sites, and five aggregate recycling plants. The operations are strategic to the suitor’s legacy aggregate properties, along with a market-leading ready mixed plant network Vulcan inherited with last year’s U.S. Concrete Inc. acquisition.