Vulcan Materials Co. entered into a transaction with Plum Creek Timber Co. Inc. for the sale of an interest in the future production at four quarries in Atlanta.
The four Vulcan quarries are in Kennesaw, Norcross, Stockbridge and Friendship, which is northeast of Atlanta near the Gwinnett and Hall county line.
With this transaction, Vulcan will receive $154 million in exchange for a percentage royalty interest in 255 million tons of aggregate production over approximately 25 years. The transaction allows Vulcan to unlock long-term value in these quarries, tax efficiently, while maintaining full ownership and operational control of the quarries, fixed assets and land. A pre-tax gain of $154 million, less modest transaction expenses, will be recognized over the life of the transaction.
Donald M. James, chairman and chief executive officer, said, “In Plum Creek, we have a partner that shares our long-term view of the value and growth in the aggregates business and is investing based on that view. This transaction provides us capital to deploy in strategic investments in our aggregates business and to strengthen our balance sheet.”
Plum Creek will receive royalty payments from the production and sale of the crushed stone from the quarries beginning in October.
“This transaction is a unique opportunity for Plum Creek to increase our interest in construction material production in the attractive southeastern markets. These quarries are exceptionally well positioned for the recovery in the infrastructure, industrial and housing sectors in and around Atlanta,” said Rick Holley, chief executive officer of Plum Creek. “We believe we are investing at the right time in the cycle, and the returns and long-term cash flow profile from these assets are compelling.”
“Plum Creek’s unique long-term approach to construction materials has allowed us to build a portfolio of owned and acquired assets with excellent return characteristics,” continued Holley. “Over the past several months, institutional investors have expressed interest in investing in similarly positioned construction material assets. We are exploring the potential to pursue strategic partnerships that would allow us to leverage our experience in this area and earn management income, while limiting the total capital investment we make in this area of our business.”