Nucor Corp. (NUE) has inked a deal to acquire an insulated metal panels (IMP) business from Cornerstone Building Brands in an all-cash transaction of $1 billion.
Nucor is the largest manufacturer of steel in the U.S. Following the announcement, shares of the company increased 1.3% on Monday’s extended trading session.
The offer price implies 10x the pre-pandemic EBITDA, inclusive of expected synergies. The deal is expected to be accretive to EBITDA margins and improve free cash flow conversion rates.
The addition of IMP business complement Nucor’s growth plans and will bring a complete range of value-added solutions to customers from seven additional manufacturing facilities. (See Nucor stock analysis on TipRanks)
Nucor CEO Leon Topalian said, “We are excited about this opportunity to acquire a historical leader and innovator in the quickly growing IMP product category serving the non-residential market. We are committed to finding new and better ways to meet our customers’ needs, and this acquisition is an excellent fit with Nucor’s long-term strategy to grow our core business and expand our product portfolio.”
IMP products comprise wall and roof panel solutions made of an energy-efficient foam core that is sandwiched between two layers of steel or aluminum. Through the acquisition, Nucor will add CENTRIA and Metl-Span — premium legacy brands that provide a wide range of products in high-end architectural solutions — to rapidly expand cold storage and warehousing applications.
IMP products are expected to generate demand at double-digit annual growth rates through this decade. The robust demand reflects new consumer preferences regarding e-commerce and grocery delivery and the expansion of data centers and server farms that need temperature-controlled climates.
The acquisition, subject to certain regulatory approvals, is expected to close later this year.
On May 14, BMO Capital analyst David Gagliano increased the price target from $86 to $110 (2.5% upside potential) and reiterated a Hold rating on the stock.
Gagliano said that Nucor is an industry-leading steel producer and has recently announced a new $3 billion share repurchase program, replacing the old program of $2 billion made in 2018.
Overall, the stock has a Moderate Buy consensus rating based on 3 Buys and 4 Holds. NUE average analyst price target of $99.14 implies a 7.7% downside potential. Shares of NUE have jumped 136% over the past year.
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