Breedon announces that it has entered into a conditional agreement to acquire Lagan Group (Holdings) Limited (“Lagan”), a leading construction materials business based in Belfast, for a cash consideration of £455 million* on a cash- and debt-free basis (the “Acquisition”). The combination of Breedon and Lagan will create a leading independent construction materials group in the UK and Ireland, and extend Breedon's geographic footprint with immediate critical mass in Ireland and across the entire value chain. The Acquisition also provides Breedon with an enhanced platform for further organic growth and bolt-on acquisitions.
Transaction highlights
· Breedon has agreed to acquire Lagan for £455 million* on a cash- and debt-free basis. The consideration will be payable to the sellers on Completion
· Lagan is a leading supplier of construction materials and contract surfacing in Ireland and the UK with a modern cement plant in Kinnegad, nine active quarries, 13 asphalt plants and nine ready-mixed concrete plants
· In the year ended 31 December 2017, Lagan generated revenues of £249 million and EBITDA of £46 million
· The consideration will be financed by a combination of a new £150 million term loan, a new £350 million revolving credit facility which replaces Breedon's existing £300 million revolving facility and a £170 million equity placing (the “Placing”)
· The Acquisition enables Breedon to enter the attractive Irish construction market and provides significant opportunities to expand upstream though the aggregates business in Ireland and downstream through the asphalt and ready-mixed concrete operations
· Breedon expects to achieve annual cost synergies of approximately £5 million by the third full year following Completion
· The Acquisition is expected to be double-digit accretive to Underlying EPS in the first full year following Completion**
* Based on locked-box accounts at 31 December 2017
**This should not be construed as a profit forecast and should therefore not be interpreted to mean that earnings per share in any future financial period will necessarily match or be greater than those for the relevant preceding financial period.
· The placing will raise gross proceeds of approximately £170 million through the issue of 222,222,222 new Ordinary Shares (the “Placing Shares”) at 76.5 pence per share (the “Placing Price”)
· Of the Placing Shares, 65,488,454 new Ordinary Shares (the “Clawback Placing Shares”) have been placed subject to a right of recall to satisfy allocations under the Clawback Placing also announced today by Breedon, the terms and conditions of which are set out in this Announcement
· Breedon also intends to raise up to approximately £4 million through the issue of 5,542,967 new Ordinary Shares pursuant to an open offer (the “Open Offer”), to allow Breedon shareholders who are not participating in the Placing to subscribe for new Ordinary Shares at the Placing Price
· Breedon's pro forma net debt is expected to be approximately 2.6x Underlying EBITDA at Completion. Leverage is expected to fall to less than 1x in 2020
Peter Tom CBE, Breedon's Executive Chairman, commented:
“We are delighted to have completed our largest acquisition to date and particularly pleased that it has been so strongly supported by our shareholders.
“Over the last eight years we have pursued a successful buy-and-build strategy which has established Breedon as the largest independent construction materials business in the UK and the acquisition of Lagan is another strategic step for us. We believe it has the potential to add significantly to the Group's performance and prospects and we are looking forward to working with our new colleagues to deliver further value for our investors.”
Pat Ward, Breedon's Group Chief Executive, added:
“Lagan represents a unique opportunity to enter a growing market with immediate scale and excellent opportunities for expansion. It significantly strengthens our cement offer, adds to our mineral and downstream resources, brings us a bitumen import/export business and adds real weight to our contract surfacing operations.
“Lagan is well-run, well-invested, with an experienced management team and a strong track record. Its culture is complementary to our own, with a sharp focus on customer service, a first-class workforce and a commitment to safety, which is a key priority for us.
“From a strategic perspective, it provides us with a stronger platform from which to pursue further organic growth and bolt-on acquisitions.”
Kevin Lagan, Chairman of Lagan Group, said:
“I'd like to thank our committed and passionate staff for the role they have played in the growth of Lagan Group and I wish them every success as they enter an exciting new chapter with Breedon, who I am confident will build on that success, supporting the development of the business in the years ahead.”