New Enterprise Completes Strategic Acquisition; Divestiture

New Enterprise Stone & Lime Co. Inc. (NESL) of New Enterprise, Pa., announced that on May 4 it acquired certain assets of Popple Construction Inc. and Pioneer Aggregates Inc., consisting primarily of one aggregate plant, one hot mix asphalt plant and a paving laydown business.

The acquired facilities are situated between NESL’s existing Clifford and Allentown, Pa., locations, allowing the company to expand its operating footprint and market scope into the Wilkes-Barre /Scranton, Pa., market.

The purchase price for the Laflin acquisition was approximately $22.3 million, net of a working capital adjustment, which was funded using existing cash and its Senior Secured Credit Facilities. The company intends to leverage its shared service center and the scalability of its infrastructure to seamlessly integrate the facilities.

On May 7, the first day of sales, NESL commenced selling, producing and accounting for all transactions from the newly acquired facilities. The company expects minimal additional selling, administrative and general expenses relating to the acquisition.

On May 8, NESL and its wholly-owned subsidiary Work Area Protection Corp., and its associated affiliates (WAPCO), entered into an Asset Purchase Agreement with Hill & Smith Holdings PLC to sell substantially all of the assets of the WAPCO business. This sale constituted the remaining component of the company’s traffic safety services and equipment business, effectively exiting the company from this business segment.

The cash purchase price for the WAPCO assets was $42.0 million. NESL utilized the net proceeds of the sale of the WAPCO assets to repay the Senior Secured Credit Facility amounts borrowed to fund the Laflin acquisition and further reduce existing debt.

Based in Illinois and Texas, WAPCO specializes in the development, manufacture and distribution of a wide range of road work zone safety products, including crash attenuators, temporary variable message signs, smart work zone systems and traffic-control products such as drums, channelizers and cones.

Representative of ongoing trading, in the two years ended Feb. 28, 2018, WAPCO recorded average revenue of $47.7 million and adjusted EBITDA of $4.8 million. The consideration paid represents a multiple of 8.7 times average adjusted EBITDA of the preceding two financial years.

Paul Detwiler III, NESL’s president and chief executive officer, commented, “The two transactions represent a key step in our strategic alignment as a construction materials company focusing on aggregate sales. We believe the Laflin acquisition, after a full year of cost savings and synergies, will generate a similar adjusted EBITDA as the WAPCO assets, allowing us to further de-leverage and de-risk NESL.”

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