Vulcan Materials Drives Inorganic Growth With Polaris Buyout

In line with its systematic inorganic strategy for expansion, Vulcan Materials Company (NYSE:VMC) entered into an agreement to acquire Vancouver-based aggregates and logistics company, Polaris Materials Corporation.

Vulcan, through an indirect subsidiary, will acquire all of Polaris’ issued and outstanding shares for C$2.79 a share in cash by way of a statutory plan of arrangement. This implies an aggregate fully diluted equity value for Polaris of approximately C$252 million.

Delving Deeper

The acquisition will expand Vulcan’s footprint in the major markets of California which are served by Polaris and also enhance its product offerings. Additionally, Vulcan will gain access to Polaris’ high capacity aggregates processing plant, deep water port on Vancouver Island along with aggregate reserves and five distribution yard outlets.

Further, Vulcan’s logistics capabilities with the ship delivery of aggregate products will get a boost. Also, it will have the opportunity to distribute its products along the Pacific Coast in future.

Inorganic Drive Strong

Since becoming a public company in 1956, Vulcan has been following a systematic inorganic strategy for expansion and has wrapped up various bolt-on acquisitions that have contributed significantly to growth. In 2014, the company concluded eight transactions that expanded its aggregates business and asphalt mix business. In 2015, it exited the ready-mixed concrete business in California and expanded the asphalt mix business in Arizona. In 2016, Vulcan expanded its aggregates distribution capabilities in Georgia and completed two strategic bolt-on acquisitions in New Mexico and Texas.

The company has closed acquisitions worth of $212 million in the first six months of 2017. In the first quarter of 2017, Vulcan acquired facilities, a marine aggregates distribution yard and building materials yards in California while in Tennessee it took over an aggregates facility, asphalt mix operations, an asphalt paving business and a rail-served aggregates operation. In the second quarter of 2017, the company signed an agreement to buy SPO Partners’ aggregates business — Aggregates USA LLC. These buyouts expand Vulcan’s ability to serve customers and bring in operational and commercial synergies.

Stock Price Movement

Vulcan’s shares have lost 9.6% year to date, wider than its industry’s decline of 3.9%. Estimates for 2017 and 2018 have moved south by 12.8% and 6.8%, respectively. Below-trend shipment growth and seasonal influences on construction activity are weighing on this Zacks Rank #5 (Strong Sell) stock’s performance.

Nevertheless, the company’s strong aggregate reserve position and strategic acquisitions should drive performance in the upcoming quarters.

Stocks to Consider

Better-ranked stocks in the sector include Beazer Homes USA, Inc. (NYSE:BZH) , M/I Homes, Inc. (NYSE:MHO) and KB Home (NYSE:KBH) .

KB Home, a Zacks Rank #1 (Strong Buy) stock, is expected to witness 51.9% growth in fiscal 2017 earnings. You can see the complete list of today’s Zacks #1 Rank stocks here.

Beazer and M/I Homes carry a Zacks Rank #2 (Buy). Beazer surpassed earnings in two of the past four quarters with an average beat of 103.47%. Full-year 2017 earnings for M/I Homes are likely to rise 37.1%.

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