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Polaris deal, Philadelphia market entry top of mind at U.S. Concrete

Pending Polaris Materials Corp. shareholder votes this month, U.S. Concrete Inc. stands to secure a premium aggregates source to integrate with its 12-plant Central Concrete Supply Co. ready mixed business in northern California. The producer has bested a Vulcan Materials offer for Vancouver, B.C.-based Polaris, which distributes sand & gravel from a major Vancouver Island deposit through five San Francisco Bay Area and Los Angeles market sites.

U.S. Concrete offered US$2.72/share in a deal valuing Polaris at $247 million—a 22 percent premium to the US$2.23/share offer Vulcan Materials announced in late August. An agreement behind the latter enabled the Polaris board to consider a “superior proposal” from other prospective suitors. The board and a special committee of independent directors have unanimously recommended that Polaris shareholders, option holders and deferred unit holders approve the U.S. Concrete offer.

“Vulcan is a disciplined buyer, and we believe that our prior agreement to acquire Polaris represented full and fair value for the company,” noted Chairman and CEO Tom Hill in a press release indicating Polaris’ change of heart and payment of an $8 million termination fee.

U.S. Concrete counterpart William Sandbrook, on the other hand, observed, “We believe Polaris is an ideal strategic fit and enables a replication in California of our vertically integrated business model in New York. The acquisition will provide long-term, high-quality aggregate reserves and is expected to deliver meaningful synergies and strengthen the company’s strategic position in highly attractive, aggregate supply-constrained California markets.”

After closing, he adds, “U.S. Concrete expects to have the capability to self-supply a large majority of its market leading ready-mixed concrete operations’ aggregate requirements in northern California and to drive increased production volumes at Polaris’ Orca Quarry. The acquisition also provides us an entrance into Southern California through the Polaris-operated Long Beach Terminal.”

Concurrent with the Polaris Materials offer, U.S. Concrete’s NorCal Materials Inc. subsidiary closed on the assets of independent producers Harbor Ready-Mix and A-1 Materials Inc., which serve residential and commercial accounts in the Peninsula and South Bay areas of San Francisco. The deal brings two concrete batch plants and 23 mixer trucks, plus the assets of L.C. Frey Co., a landscape materials business tied to A-1.

The plants afford U.S. Concrete increased capacity in northern California. “Expanding our presence and diversifying our customer base in this vibrant and growing market is very exciting,” said Sandbrook. “Pent up demand from recent weather delays and a significantly undersupplied residential housing market will allow us to gain immediate traction.”

ACTIONABLE MARKET

While seizing opportunities in California during the third quarter, U.S. Concrete was also tending to matters boosting its Mid-Atlantic market footprint. The company has entered one of the few major U.S. cities lacking a ready mixed producer from the industry’s upper ranks, acquiring the assets of Philadelphia’s Action Supply Co. A primary source of high-performance concrete for commercial and public works projects, Action Supply offers vertical integration potential with Corbett Aggregates Companies, a Quinton, N.J., sand producer U.S. Concrete acquired earlier this year.

“This acquisition continues our strategy of finding great businesses in new markets with future bolt-on and consolidation opportunities. The Philadelphia metro market is mature and stable, with many of the same attributes in our other successful markets,” says U.S. Concrete CEO William Sandbrook. “Action’s ability to meet demanding specifications in difficult operating environments fits [our] model.”

For 58 years, he adds, Action Supply has been known for service and innovation in concrete delivery. The Pennsylvania Department of Transportation-approved producer counts among its Philadelphia order log the Lincoln Financial Field, Citizens Bank Park, FMC Tower and South Street Bridge replacement projects.


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