Vulcan Inks $1.294B Cash Deal to Buy U.S. Concrete

The global producer of construction aggregates, Vulcan Materials Company (VMC), has agreed to buy U.S. Concrete, Inc. (USCR), a supplier of aggregates and ready-mixed concrete, in a cash deal valued at $1.294 billion.

Per the terms of the deal, Vulcan will buy all of the outstanding shares of U.S. Concrete at a purchase price of $74.00 per share in cash.

The transaction has been approved by the boards of both companies and is expected to close in the second half of 2021, subject to U.S. Concrete’s shareholder and other regulatory approvals. (See Vulcan Materials stock analysis on TipRanks)

U.S. Concrete has 27 aggregates operations that serve California, Texas, and the Northeast. In 2020 alone, the company shipped 12.6 million tons. The acquisition of USCR proves to complement Vulcan’s existing footprint and the ready-mixed concrete operations will be advantageous in expanding Vulcan’s service capabilities.

Upon closure, the deal is expected to be accretive to Vulcan’s earnings per share in the first full year post-merger and increase its EBITDA by about $190 million, excluding synergies.

Commenting on the deal, Vulcan’s Chairman and CEO, Tom Hill said, “U.S. Concrete is an important Vulcan customer in a number of key areas, and this transaction is a logical and exciting step in our growth strategy as we further bolster our geographic footprint.”

On May 4, Vulcan reported Q1 earnings of $0.56 per share (excluding gain on sale of land) surpassing the Street’s estimate of $0.45 per share. Revenue came in at $1.06 billion, outpacing analysts’ expectations of $1.02 billion. The company also raised its Adjusted EBITDA outlook for FY21 to between $1.38 and $1.46 billion.

Recently, J.P. Morgan analyst Adrian Huerta lifted the price target on the stock to $190 (6.77% upside potential) from $180 and maintained a Hold rating.

Huerta expects a new infrastructure bill to add 15% – 20% in gains to the construction materials sector, but those gains could be cut in half if accompanied by higher corporate taxes.

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 3 Buys and 4 Holds. The Vulcan average analyst price target of $193.67 implies 8.8% upside potential to current levels. Shares have gained 43.5% over the past year.

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