Breedon, the Leicestershire-based construction materials group, has entered into a conditional agreement with CEMEX UK Operations Limited (CEMEX) to acquire certain assets and operations in the UK for £178 million.
The assets being divested by a CEMEX subsidiary 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.
In a statement Breedon said that the acquisition is “consistent with Breedon’s strategy of acquiring earnings-enhancing aggregates related businesses with strong potential for performance improvements and synergy benefits.”
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.
As a result of the acquisition, Breedon noted that group mineral reserves and resources will increase by approximately 170 million tonnes, enough to last over 27 years at current extraction rates. The company also expects to achieve annual net pre-tax cost synergies of approximately £2 million by the third full year following completion.
Pat Ward, Breedon’s Group Chief Executive, said: “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 tonnes 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.”
CEMEX noted that after completion of the divestiture, it 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.
Some CEMEX employees will transfer employment under TUPE regulations to the new owner and there will be a consultation process with affected employees. The total number of employees affected is not yet clear and the validation process starts immediately.