Breedon has announced that it has entered into a conditional agreement with CEMEX UK Operations Limited to acquire certain assets and operations in the United Kingdom for a total consideration of £178 million on a cash and debt free basis.
The combination of Breedon and CEMEX’s UK Assets is hoped to enhance Breedon’s position as a leading construction materials group in Great Britain and Ireland.
• Breedon has agreed to acquire CE
MEX’s UK Assets for £155 million in cash together with the assumption of £23 million of lease liabilities. The cash consideration will be payable to the seller on completion.
• CEMEX’s UK Assets encompass approximately 100 active operations across six divisions located in Scotland, Wales, North-East England, Norfolk, the East Midlands, and Yorkshire.
• In the year ended 31 December 2018, CEMEX’s UK Assets generated revenue of £178 million and EBITDA of £23 million.
• The cash consideration will be financed by existing £350 million revolving credit facility and drawdown of £80 million through exercise of accordion option.
• Group mineral reserves and resources will increase by approximately 170 million t, enough to last over 27 years at current extraction rates.
• Breedon expects to achieve annual net pre-tax cost synergies of approximately £2 million by the third full year following completion.
• Return on invested capital is forecast to cover the Group’s weighted average cost of capital by the end of 2022.
• Breedon’s pro forma net debt is expected to be approximately 2.4x Underlying EBITDA (2.2xon a covenant basis) at completion and to reduce below 1.0x during 2022.
• Completion is expected in the second quarter of 2020, subject to completion of a TUPE Consultation process.
Pat Ward, Breedon’s Group Chief Executive, commented: “This is a unique opportunity to extend our national network through a single value-enhancing transaction, substantially increasing our footprint in several regions of Great Britain where we are currently underrepresented and adding approximately 170 million t of mineral reserves and resources. It also delivers a step-change in the development of our national asphalt strategy.There is potential to drive significant performance improvements across these new assets and they will also strengthen our platform for further organic growth and bolt-on acquisitions. In addition to the cost synergies we anticipate, we also expect the deal to be accretive to both earnings and free cash flow in the first full year, with a positive ongoing impact on the cash generation of the enlarged Group.”
The assets being divested consist of 49 active ready-mix concrete plants, 28 active aggregates operations, 4 depots, a cement terminal, 14 asphalt plants and 4 building products plants. Part of the CEMEX Paving Solutions business is included in the sale as well as some inactive sites and they will all be integrated into Breedon’s business. The sites being divested are in areas that are more attractive to the new owner. After completion of the divestiture, CEMEX will still retain a substantial integrated business in the United Kingdom encompassing, among other things, cement production, ready-mix concrete, aggregates, asphalt, and paving solutions.
CEMEX has committed to optimising its portfolio by focusing on markets with greatest long-term growth potential and divesting between US$1.5 and 2 billion by 2020. The plants and quarries being sold fit more effectively with the new owner, so they will be more likely to thrive in new ownership. The divestment also releases cash for CEMEX to improve its financial position and/or invest elsewhere.
Read the article online at: https://www.worldcement.com/europe-cis/08012020/breedon-group-to-acquire-certain-assets-and-operations-of-cemex-uk/