Breedon Group’s Shares Rallied 7.11% on $300M BMC Acquisition

The Breedon Group PLC (LON: BREE) share price rallied 7.11% after unveiling plans to acquire another firm for US$300 million. The company announced its strategic acquisition of BMC Enterprises Inc., a key player in the supply of ready-mixed concrete, aggregates, and building products, for a transaction value of US$300 million (£238.1 million). 

This acquisition marks a significant step in Breedon's expansion, establishing a scalable new platform in the United States fragmented yet burgeoning construction materials market. BMC, based in St. Louis, Missouri, has demonstrated substantial growth both organically and through acquisitions, positioning it as a vital asset for Breedon's entry into the US market.

The acquisition provides Breedon with a solid foundation in a lucrative market backed by a business known for its high margins. The experienced management team at BMC, recognised for their extensive track record, will continue to lead the company, ensuring stability and ongoing success.

Financially, the acquisition is poised to deliver appealing returns and contribute positively to Breedon's financial health, keeping the balance sheet robust. For the year ending on October 31, 2023, BMC reported unaudited revenues of US$178.9 million and an adjusted EBITDA of US$35.5 million.

The transaction values BMC at approximately 8.5 times its 2023 unaudited adjusted EBITDA. BMC has demonstrated consistent revenue growth and adjusted EBITDA since 2013, with compound annual growth rates of approximately 12% and 22%, respectively, fueled by organic expansion and strategic acquisitions.

BMC boasts over 400 million tonnes of reserves and resources, underpinning its long-term value proposition. The acquisition includes a cash payment of approximately US$285 million at completion, with adjustments and retentions typical for such transactions, financed through Breedon's existing Revolving Credit Facility.

An additional US$15 million will be paid in Breedon shares, which the seller will hold for at least twelve months post-completion. The acquisition is scheduled to be finalised by March 7, 2024, subject to the standard closing conditions.

This strategic move is expected to enhance Breedon's earnings in the first full year following the acquisition. Following the acquisition, Breedon's post-acquisition Pro Forma Covenant Leverage is anticipated to be around 1.4 times, offering the group flexibility for dividend distributions and future strategic acquisitions.

This acquisition signifies a pivotal moment for Breedon as it embarks on a growth journey in the United States, leveraging BMC's established market presence and growth trajectory to bolster its position as a leading construction materials provider.

Breedon share price. 

The Breedon Group share price rallied 7.11% to trade at 407.00p from Tuesday’s closing price of 380.00p.