The CSR Group is continuing its expansion in the US heavy building materials sector with the agreement by CSR America to purchase American Limestone Company (ALC) for US$211 million, subject to regulatory approval.
ALC is a major aggregates and pre-mixed concrete producer in central and eastern Tennessee, and into Virginia, with nine hard rock quarries, currently producing around eight million tons of aggregate per year. This is equivalent to almost 25% of CSR America’s current annual aggregates production. ALC is a division of ASARCO, Inc. which was acquired by Grupo Mexico S.A. de C.V. - a diversified mining company and one of the largest copper miners in the world - in 1999.
CSR Group Managing Director Peter Kirby said American Limestone was a significant strategic acquisition which would enable CSR America (CSRA) to continue its development of strong regional positions and ongoing profitable growth.
"ALC is a further move towards building CSRA’s US operations, and represents a major ‘step out’ in the aggregates sector. It is a valuable strategic acquisition - extending the CSRA footprint with substantial market positions in a new region, adjoining the current position in Georgia, and adding to CSRA’s strong presence in the south east US. We expect CSRA to build on this business in the future, further strengthening ALC’s market positions in Tennessee and adjoining regions," said Mr Kirby.
"Opportunities in this region are also enhanced by Tennessee’s high level of federal infrastructure spending over the next few years, and the region’s higher than average projected population growth rates - both of which are key drivers of construction activity and aggregates consumption.
"ALC also has extensive aggregates reserves - a prized resource," he said.
ALC has a 42 year history in the aggregates industry, and operates hard rock quarries in areas around Knoxville, Nashville and the Tri-Cities area (north east Tennessee / south west Virginia). The company produces construction aggregates, pre-mixed concrete (in six concrete plants) and agricultural limestone, selling its products in Tennessee, Virginia, Kentucky, North Carolina and South Carolina.
ALC has high levels of valuable aggregate reserves - more than 500 million tons or around 70 years of permitted reserves, together with extensive unpermitted reserves.
Tennessee and Virginia are among the US states which have both above average population growth, and above average growth in their funding allocation under the US Government’s Transport Equity Act for the 21st Century (TEA-21) US$216 billion highway infrastructure program. The TEA-21 allocation for both Tennessee and Virginia are up 60% on the previous six year program, well above the national average of 45%. More than 40% of ALC’s end markets are currently in the roads and highway sector. Population growth in ALC’s market regions in 2000-2020 is projected at 37% above the national average.
ALC is projected to be earning above its cost of capital in its first full year of ownership (year ended March 2002). The business is also forecast to be earnings per share positive in the same year. The ALC purchase price of US$211 million includes all plant and equipment and working capital. It also includes tax election benefits - which CSRA will be entitled to claim - with an estimated value of around US$34 million.
CSRA CEO David Clarke said ALC was a quality operation and CSRA had identified a number of further improvement opportunities to enhance performance.
"These opportunities, together with various operational synergies, will be implemented as soon as possible after the purchase is concluded," he said.
With the agreement to purchase announced today, CSR America has invested over US$550 million in the US since March 1998. This includes the US$147 million new dry-process cement mill in Miami, Florida which is now in operation and will produce over 1 million tons of cement per annum. New concrete pipe plants producing a total of over 350,000 tons of pipe have also been completed in Miami, Washington, D.C., and Columbia, South Carolina. New plants are also under construction in Houston, Texas and Alexandria, Louisiana.
CSR America has operations in 29 states across the U.S., with operations in quarries and cement, pre-mixed concrete, pipe and concrete products, and distribution. In the year ended March 2000, CSRA trading revenue rose 15% to US$1,726 million and EBIT rose 44% to US$211 million. CSRA represents 46% of CSR Group revenue.