Arcosa completes $1.2 billion Stavola acquisition

DALLAS - Arcosa , Inc. (NYSE: NYSE:ACA), a company specializing in infrastructure-related products and solutions, has announced the completion of its acquisition of Stavola Holding Corporation's construction materials business for $1.2 billion. This strategic move is aimed at expanding Arcosa's presence in the New York-New Jersey Metropolitan Statistical Area (MSA) and underscores the company's focus on aggregates-led acquisitions.

Stavola, established in 1948, operates five hard rock natural aggregates quarries, twelve asphalt plants, and three recycled aggregates sites. The acquired business reported revenues of $283 million and an Adjusted EBITDA of $100 million for the last twelve months ended June 30, 2024, which translates to a 35% Adjusted EBITDA Margin. The aggregates segment alone contributed 56% to Stavola's Adjusted EBITDA during this period.

The acquisition was financed through a $600 million Senior Note issuance at 6.875% due 2032, completed on August 26, 2024, and a $700 million variable-rate senior secured Term Loan B Facility due 2031. The transaction is also expected to yield tax benefits for Arcosa, estimated at a net present value of about $125 million.

In a related move, Arcosa completed the sale of its steel components business on August 16, 2024. The divestiture is part of the company's broader strategy to grow in less cyclical and complex markets. The company anticipates the steel components business to report an Adjusted EBITDA loss of $1.0 million to $1.5 million for the quarter ended September 30, 2024, due to deferred shipments and disruptions from the sale process.

Antonio Carrillo, President and CEO of Arcosa, stated that these transactions advance the company's strategy to grow in attractive markets and reduce the complexity and cyclicality of its portfolio. He highlighted the long-term strategic benefits and the potential for shareholder value creation. Carrillo also mentioned the company's plan to return to a net leverage target of 2.0-2.5x within 18 months, utilizing strong free cash flow.

Arcosa will provide updated full-year 2024 revenue and Adjusted EBITDA guidance, factoring in these transactions, with the release of its third-quarter earnings.

Based in Dallas, Texas, Arcosa operates in three principal business segments: Construction Products, Engineered Structures, and Transportation Products. This news article is based on a press release statement.

In other recent news, Arcosa, Inc., a Dallas-based manufacturer, has been active in strategic financial maneuvers. The company has amended its credit agreement to facilitate the acquisition of Stavola Holding Corporation's construction materials business for $1.2 billion in cash. Arcosa plans to issue $600 million in 6.875% senior unsecured notes due 2032, along with securing a new senior secured Term Loan B Facility due 2031 of up to $700 million. Proceeds from these financial instruments aim to finance the acquisition and cover related fees and expenses.

In addition to these financial developments, Arcosa has reported a 14% increase in record quarterly revenues and a 31% increase in adjusted EBITDA. Analyst firms Oppenheimer and Loop Capital have maintained positive outlooks on the company, with Oppenheimer maintaining an Outperform rating and raising the shares target to $105, while Loop Capital maintains a Buy rating and has increased its stock price target to $110.

Arcosa is also focusing on strategic restructuring, as evident from the divestiture of its steel components business to Stellex Capital Management. These recent developments reflect Arcosa's strategic focus on deleveraging, organic growth, and efficiency improvements, aligning with their growth objectives.

InvestingPro Insights

Arcosa's recent acquisition of Stavola Holding Corporation's construction materials business aligns well with its financial performance and market position. According to InvestingPro data, Arcosa boasts a market capitalization of $4.56 billion, reflecting its significant presence in the infrastructure sector. The company's revenue growth of 13.66% in the most recent quarter underscores its expansion strategy, which is further bolstered by this $1.2 billion acquisition.

InvestingPro Tips highlight Arcosa's financial strength, noting that its liquid assets exceed short-term obligations, allowing for strategic moves like the Stavola acquisition. Additionally, the company operates with a moderate level of debt, which is crucial given the recent financing arrangements for the acquisition.

The acquisition's focus on aggregates aligns with Arcosa's profitability metrics. With a gross profit margin of 19.03% and an operating income margin of 7.68% over the last twelve months, the integration of Stavola's high-margin aggregates business (56% of Stavola's Adjusted EBITDA) could potentially enhance Arcosa's overall profitability.

Investors should note that Arcosa is trading at a high earnings multiple, with a P/E ratio of 35.78. This valuation suggests market confidence in the company's growth prospects, which the Stavola acquisition aims to fulfill. The strong return of 17.4% over the last three months, as reported by InvestingPro, indicates positive market sentiment towards Arcosa's strategic decisions.

For those interested in a deeper analysis, InvestingPro offers 6 additional tips for Arcosa, providing a more comprehensive view of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.