Arcosa has entered into a definitive agreement to acquire the construction materials business of Stavola Holding Corp. and its affiliated entities for $1.2 billion in cash, subject to customary post-closing adjustments.
Founded in 1948, Stavola is an aggregates-led and vertically integrated construction materials company primarily serving the New York-New Jersey Metropolitan Statistical Area (MSA) through its network of five hard rock natural aggregates quarries, 12 asphalt plants and three recycled aggregates sites.
For the last 12 months ended June 30, Stavola generated revenues of $283 million and Adjusted EBITDA of $100 million, representing a 35% Adjusted EBITDA Margin. The aggregates business contributed 56% to Stavola’s LTM Adjusted EBITDA. The structure of the transaction is expected to create tax benefits attributable to Arcosa with a net present value of approximately $125 million.
Commenting on the acquisition, Antonio Carrillo, Arcosa’s president and chief executive officer, noted, “Since becoming an independent public company in 2018, Arcosa has successfully executed against its long-term vision to grow in attractive markets and reduce the complexity and cyclicality of the overall business through strategic acquisitions and select divestitures. Over that time, we have expanded our Construction Products business both organically and inorganically, deploying approximately $1.5 billion on value enhancing acquisitions to date and increasing our aggregates presence in the top 50 MSAs.
“The acquisition of Stavola accelerates Arcosa’s strategic transformation by adding a premier aggregates-led platform in the nation’s largest MSA with favorable attributes from its exposure to lower volatility infrastructure-led end-markets. Pro forma for the transactions, Construction Products represents 65% of Arcosa’s LTM Adjusted EBITDA, and consolidated LTM Adjusted EBITDA Margin expands approximately 220 basis points. Stavola brings an experienced management team, a reputation for strong customer service, and a successful track record,” Carillo concluded.
Arcosa has also entered into a definitive agreement to sell its steel components business to Stellex Capital Management LLC, a New York-based private equity firm.
During the second quarter of 2024, the company took additional actions to optimize its portfolio and improve margins:
- Divested its single-location subscale asphalt and paving operation located in Tennessee that was operating at a modest loss.
- Sold a non-operating facility within Engineered Structures.
- Exited a small underperforming natural aggregates operation serving the Permian Basin in west Texas and redeployed the equipment.
Total consideration for the divestitures was $137 million, which will be used to pay down debt.
Commenting on the portfolio actions, Carrillo continued, “Today’s announcements underscore the strength of our company and our confidence in the growth opportunities ahead of us. Construction Products and Engineered Structures are benefiting from increased scale and more resilient platforms and are well-positioned to benefit from infrastructure-driven tailwinds. Additionally, our two remaining cyclical businesses, wind towers and barge, command industry-leading positions with solid backlog visibility in place and anticipated multi-year market recoveries underway.
“We have committed financing in place to fund the purchase of Stavola that will result in initial net leverage above our targeted range. Our permanent financing strategy will allow for rapid deleveraging at an attractive cost of capital. Based on the anticipated strength of our cash flow generation, our goal is to return to our long-term net leverage targeted range within 18 months.”
Carrillo concluded, “We believe these portfolio actions underscore our commitment to increasing long-term shareholder value and our disciplined approach to capital allocation. We look forward to welcoming the Stavola team and customer base to Arcosa, and express our gratitude to the employees of our steel components business for their dedication and contributions to Arcosa.”