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Market conditions favor Hanson products business public offering

The most recent proposed initial public offering of a business featuring U.S. and Canadian concrete production assets, Votorantim Cementos, was withdrawn with little explanation last fall. As presented by Brazil’s Votorantim Industrial S.A., the
IPO encompassed a portfolio of cement and concrete operations in the Americas, Europe and Africa, and had a target value hovering $5 billion.

A smaller scale, prospective offering of a business confined to North America and the United Kingdom has surfaced amid improving residential, commercial and infrastructure market conditions. It could strengthen an already dominant player, and influence concrete and clay product operator valuations and acquisitions on both sides of the Atlantic.

HeidelbergCement AG officials have outlined prospects for an offering of a recently chartered entity, Hanson Building Products Ltd., spanning U.S., Canadian and U.K. pipe, precast, brick and roof tile production assets inherited in the 2007 takeover of Hanson Plc. Their Securities and Exchange Commission registration statement paves the way for New York Stock Exchange trading.

Heidelberg notes that the business closed a June fiscal year with $1.15 billion in sales and $104.3 million pro forma adjusted EBITDA. The SEC filing does not specify a target IPO date or share price, but suggests the seller would maintain a stake and agree to provide Hanson Building Products administrative and back office support functions for an interim period. The document also indicates a cement supply arrangement between Heidelberg and the spin off. Although existing management of the concrete and steel pipe, precast, concrete roof tile and clay brick business—88 U.S. and Canadian plants plus 19 U.K. plants and distribution sites—is centered in Irving, Texas, alongside Lehigh Hanson Inc. headquarters, the registration statement indicates that Hanson Building Products Ltd. will have U.K. executive offices.

“As a public company, we will be able to pursue our own distinct operating priorities and strategies, including pursuing new organic growth opportunities designed to increase net sales and profitability,” Heidelberg officials note in their SEC filing, pointing most immediately to capital investment in steel pressure pipe and clay brick production capacity in Texas and the U.K., respectively. “We also expect to continue to selectively enter new geographies in our pressure pipe and gravity pipe and precast businesses, leveraging our sales and distribution platforms, engineering capabilities and existing customer relationships. As a public company, we also expect to benefit in the areas of raw material purchasing, information technology systems and hedging practices.”

Hanson Building Products’ 10-member senior management team, led by CEO Plamen Jordanoff, has an average of 18 years’ experience in building products. Members have overseen or supported 31 merger and acquisition transactions since 2002, positioning the company with leading or strong stakes in each of its market segments, especially North American concrete gravity and pressure pipe.

“We intend to selectively pursue acquisitions of businesses that we believe are a complementary geographical or product offering fit with our existing operations and that provide an opportunity to generate attractive returns. We believe there are numerous current acquisition opportunities and significant synergies will be available upon acquisition,” principals note in the SEC registration statement.

The IPO would follow a similar offering earlier this year for PVC pipe leader, Advanced Drainage Systems—a NYSE-listed counterpart of Hanson Building Products’ largest business, Hanson Pipe & Precast. If the second offering goes through, credit both ADS and Hanson Building Products for having management that investors recognize. Downstream of Wall Street, a Hanson Pipe & Precast business free of competing for Heidelberg resources might be better positioned to reinforce the investment rationale for rigid concrete pipe versus the flexible alternative from the likes of an ADS.