First publishedon www.AggBusiness.com
Breedon has entered into a conditional agreement to acquire Lagan Group (Holdings), a leading construction materials business based in Belfast, Northern Ireland, for a cash consideration of £455 million (€530 million) on a cash- and debt-free basis.
Lagan is a leading supplier of construction materials and contract surfacing in Ireland and the UK with a modern cement plant in Kinnegad; nine active quarries; 13 asphalt plants, and nine ready-mixed concrete plants
The combination of Breedon and Lagan will create a leading independent construction materials group in the UK and Ireland, and extend Breedon’s geographic footprint with immediate critical mass in Ireland and across the entire value chain. The acquisition also provides Breedon with an enhanced platform for further organic growth and bolt-on acquisitions.
Following the acquisition of Lagan, Breedon Group will be a leading construction materials group in the UK and Ireland. It will operate two cement plants, around 70 quarries; 40 asphalt plants; 200 ready-mixed concrete and mortar plants; nine concrete and clay products plants; four contract surfacing businesses; six import/export terminals, and two slate production facilities.
The group will employ nearly 3,000 people and have around 870 million tonnes of mineral reserves and resources.
The group’s strategy is to continue growing organically and through the acquisition of businesses in the heavyside construction materials market.
The acquisition enables Breedon to enter the attractive Irish construction market and provides significant opportunities to expand upstream though the aggregates business in Ireland and downstream through the asphalt and ready-mixed concrete operations, while Breedon says it expects to achieve annual cost synergies of approximately £5 million by the third full year following completion
Peter Tom CBE, Breedon’s executive chairman, said: “We are delighted to have completed our largest acquisition to date and particularly pleased that it has been so strongly supported by our shareholders.
“Over the last eight years we have pursued a successful buy-and-build strategy which has established Breedon as the largest independent construction materials business in the UK and the acquisition of Lagan is another strategic step for us. We believe it has the potential to add significantly to the group’s performance and prospects and we are looking forward to working with our new colleagues to deliver further value for our investors.”
Pat Ward, Breedon’s group chief executive, added: “Lagan represents a unique opportunity to enter a growing market with immediate scale and excellent opportunities for expansion. It significantly strengthens our cement offer, adds to our mineral and downstream resources, brings us a bitumen import/export business and adds real weight to our contract surfacing operations.
“Lagan is well-run, well-invested, with an experienced management team and a strong track record. Its culture is complementary to our own, with a sharp focus on customer service, a first-class workforce and a commitment to safety, which is a key priority for us.
“From a strategic perspective, it provides us with a stronger platform from which to pursue further organic growth and bolt-on acquisitions.”
Kevin Lagan, chairman of Lagan Group, said: “I’d like to thank our committed and passionate staff for the role they have played in the growth of Lagan Group and I wish them every success as they enter an exciting new chapter with Breedon, who I am confident will build on that success, supporting the development of the business in the years ahead.”
In the year ended 31 December 2017, Lagan generated revenues of £249 million and EBITDA of £46 million, and the latest consideration will be financed by a combination of a new £150 million term loan, a new £350 million revolving credit facility which replaces Breedon’s existing £300 million revolving facility and a £170 million equity placing.
The acquisition is expected to be double-digit accretive to underlying EPS in the first full year following completion but, says Breedon this should not be construed as a profit forecast and should therefore not be interpreted to mean that earnings per share in any future financial period will necessarily match or be greater than those for the relevant preceding financial period.