Arcosa Inc. has completed the previously announced acquisition of the construction materials business of Stavola Holding Corp. and its affiliated entities for $1.2 billion.
Founded in 1948, Stavola is an aggregates-led and vertically integrated construction materials company primarily serving the New York-New Jersey Metropolitan Statistical Area 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.
The acquisition was funded with a $600 million 6.875% Senior Note issuance due 2032, which closed on Aug. 26, and a pre-payable $700 million variable-rate senior secured Term Loan B Facility due 2031, which funded concurrently with the closing of the transaction. Excess cash proceeds will be used to pay down borrowings on our revolving credit facility.
Additionally, the company completed the previously announced sale of its steel components business on Aug, 16. For the quarter ended Sept. 30, the company estimates Adjusted EBITDA for the business will be a $1.0 million to $1.5 million loss, reflecting a partial period of ownership that was impacted by the deferral of certain product shipments and business interruption from actions necessary to complete the divestiture process.
Antonio Carrillo, president and chief executive officer, commented, “We are pleased to announce the successful completion of the Stavola acquisition and the divestiture of our steel components business. These transactions significantly advance our strategy of growing in attractive markets while reducing the cyclicality and complexity of our overall portfolio. Stavola underscores our aggregates-led acquisition strategy, expanding our platform into the nation’s largest MSA with industry-leading financial attributes. Proforma for these transactions, our Construction Products segment represents nearly two-thirds of our Adjusted EBITDA, up from one-third at our spin-off, and our Adjusted EBITDA Margin increases more than 200 basis points.
“In August, we arranged attractive permanent financing for the acquisition, providing ample prepayment flexibility to reduce debt, consistent with our deleveraging strategy. As a near-term capital allocation priority, we anticipate deploying our strong free cash flow to return to our net leverage target of 2.0-2.5x within 18 months.”
Carrillo concluded, “We are excited to welcome Stavola and its experienced management team and look forward to the long-term strategic benefit and value creation this transaction will achieve for Arcosa’s shareholders.”
The company plans to update its full year 2024 revenue and Adjusted EBITDA guidance for the completion of these transactions in connection with the release of its third quarter earnings.