The Brickworks (ASX: BKW) share price has risen around 1% after making another US based acquisition.
Brickworks was listed on the ASX in 1962 and has paid a dividend every year since then. The construction business has four divisions – Building Products Australia (eg Austral Bricks), Building Products North America (Glen Gery), Property and Investments (it owns 39.4% of Washington H. Soul Pattinson & Company).
Brickworks’ Latest US Acquisition
Brickworks has announced that it is going to acquire Redland Brick Inc for up to US$48 million with settlement expected to complete in February 2020.
The acquisition includes four modern manufacturing sites, including two in Maryland, one in Pennsylvania and one in Virginia with sales of approximately 80 million bricks a year.
The sale price is US$35 million upfront with up to US$13 million of deferred payments, subject to certain conditions being met. This will be funded by existing debt facilities.
Redbrick has a leading market position in the Northeast and Mid-Atlantic regions of the US with several established brands. Brickworks said it has a strong reputation for premium architectural products.
Between the five production lines across four manufacturing sites, it has a total capacity of around 250 million bricks a year.
The acquired assets also include “extensive” raw material reserves, with the vast majority of clay used in production being sourced from quarries located on the manufacturing sites.
This acquisition is expected to achieve an additional 3% profit / earnings per share (EPS) growth after implementing the identified cost synergies, which includes significant ‘production rationalisation benefits.”
US Market Leadership
Brickworks announced that after the acquisition of Sioux City Brick and Glen Gery, it is now the market leader in key states in the Northeast, Midwest and Mid-Atlantic regions. It will sell around 400 million bricks a year with revenue of AU$290 million.
Brickworks Managing Director Lindsay Partridge said: “These acquisitions follow a thorough strategic review, where the North American brick industry was identified as a highly attractive long-term growth opportunity for Brickworks. This strategy is underpinned by the significant value creation opportunities available through consolidation and rationalisation of under-utilised facilities across the industry.”
Brickworks plans to close the Redfield plant with the volume transferred to nearby Adel, which should allow for “significant manufacturing efficiencies to be achieved.”
The next focus will be the integration of the Redland operation, optimising distribution channel, introducing new products and focusing on positioning on premium products and style.
Mr Partridge pointed to target market cities like New York, Washington DC, Boston, Philadelphia, Baltimore, Pittsburgh, Columbus, Chicago and Detroit which have a strong heritage with brick construction.
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Disclosure: Jaz owns shares of Washington H. Soul Pattinson and Co. at the time of writing, but this could change at any time.
