Accelerates 'Elevate Summit' by Creating
Premier Enterprise with ~$1 billion
Combined EBITDA Including $100
Million of Synergies
Expands Summit's Cement Footprint in Rapidly
Growing, Year-Round Markets with Reduced Seasonality
Enhances Scale and Ability to Meet Demand in
Increasingly Capacity-Constrained U.S. Cement Market
Expected to Increase Free Cash Flow per Share
by 15-25%
DENVER, Sept. 7,
2023 /PRNewswire/ -- Summit Materials, Inc.
(NYSE: SUM) ("Summit," "Summit Materials," "Summit Inc." or the
"Company") is pleased to announce it has entered into a definitive
agreement with Cementos Argos S.A. (CCB.CN, CEMARGOS CB) ("Cementos
Argos") under which Summit will combine with Argos North America
Corp. ("Argos USA"), the U.S.
operations of Cementos Argos in a cash and stock transaction valued
at $3.2 billion.
Argos USA is among the largest
cement producers by total installed capacity in its areas of
operations, which include the Southeast, Mid-Atlantic, and
Texas. With its asset footprint
comprising four integrated cement plants, approximately 140
ready-mix plants and eight ports, Argos USA's portfolio is well positioned to
capitalize on positive demand drivers across public infrastructure,
residential, and commercial end-markets. Argos USA has a total installed cement grinding
capacity of 9.6 million tons per annum with additional import
capacity providing incremental scale and operational flexibility.
Approximately 85% of Argos USA
EBITDA is generated from its leading cement platform.
The combination of Summit and Argos USA will create the fourth-largest cement
platform in the United States and
accelerates Summit's 'Elevate Summit' strategy, enhancing the
Company's materials-led approach and positioning it for even
greater success with a national footprint and significantly
improved scale. With a deeper and broader network of assets, Summit
and its shareholders will benefit from geographic diversification,
expanded operational and commercial capabilities, and the ability
to better meet growing demand for high quality construction
materials in the United
States.
Under the terms of the agreement, Cementos Argos will receive
approximately $1.2 billion in cash
(~40% of transaction value) subject to closing adjustments, and
approximately 54.7 million shares of Summit stock (~60% of
transaction value), valuing Argos USA at approximately $3.2 billion based on Summit's closing share
price of $36.00 as of September 6, 2023. The transaction reflects a
pre-synergized enterprise value to EBITDA multiple of approximately
10x based on full year 2023 estimated EBITDA for Argos USA or below 8x on a post-synergies basis.
Anne Noonan, Summit Materials
President and CEO said, "Combining Argos USA with Summit is a significant milestone as
we execute against and accelerate our materials-led portfolio
strategy. The transaction will extend our geographic reach into
high growth markets, creating a leading cement enterprise
nationwide, and bring together two talent-rich organizations to
innovate and deliver value-added solutions for our customers.
Financially, we have clear line of sight to achieving targeted
synergies of more than $100 million
annually as we unlock the full potential of this powerful
combination. The Argos USA team
has done an excellent job growing and operating its business, and
we look forward to welcoming them, and their expertise, to the
Summit family."
Jorge Mario Velasquez, Chairman
of the Board at Cementos Argos SA said: "We are committed to
strengthen and help shape the future of the combined company: we
intend to be long-term shareholders. Our commitment to the success
of this platform transcends the transaction itself. We believe in
the growth potential and value generation that this transaction
offers, and we want to actively participate jointly with the Summit
family by contributing our knowledge and expertise to drive that
growth."
Strategic and Financial Benefits of the Transaction
Accelerates 'Elevate Summit' Strategy:
- Creates a materials-led North American leader with over
$4 billion in revenue and
approximately $1 billion in EBITDA,
including synergies.
- Increases Summit's annual EBITDA generated by Aggregates and
Cement to 78%, up from 70% at year-end 2022.
- Expands Summit's position in high-growth, underserved MSAs
and enhances Summit's ability to meet customer demand for cement in
a capacity-constrained domestic market.
- Strengthens Summit's platform for Aggregates growth across the
Southern U.S.
Extends Summit's Leadership Position in Cement:
- Creates the largest U.S. based cement producer with the
addition of Argos USA's four
strategically located cement plants.
- Reduces the seasonality of Summit's cement business due to
enhanced geographic diversification, particularly in the Southeast,
Mid-Atlantic, and Texas.
- Extensive network of rail and port assets provides low-cost
modalities, high quality customer service, and operational
flexibility.
Commitment to Excellence, Sustainability, and
Innovation:
- Enhances internal efficiencies, sourcing opportunities,
and solutions for customers, building on improvements in EBITDA
margin within Summit's Cement Business, which has improved to
36.7%, up nearly 250 basis points since 2020.
- Underscores Summit's commitment to being the most socially
responsible integrated construction materials solutions provider.
Leveraging a proven track record on sustainability, Summit will
apply its unique Green America Recycling Business as well as other
fuel and emissions reducing technologies to a broader
platform.
- With an extensive pool of talent, resources, and operational
expertise, the combined company will be poised to drive innovation
in the construction materials industry.
Significant Synergy Generation and Value Creation with a Well
Capitalized Balance Sheet:
- Greater than $100 million of
annual operational synergies, via improved plant productivity and
operational excellence initiatives, sourcing and SG&A
optimization, and fleet modernization. Significant synergy
realization expected within two years of transaction close.
- Pro forma combined EBITDA, inclusive of synergies, is expected
to be approximately $1 billion before
additional growth and expansion opportunities associated with a
larger platform.
- The transaction is expected to be 15-25% accretive to free cash
flow per share as well as accretive to the Company's revenue and
EBITDA growth rates.
- The Company expects Return on Invested Capital from the
transaction to exceed its Weighted Average Cost of Capital by year
three and for the Company's overall ROIC to exceed 10% within
two years of close.
- Assuming a first half 2024 close, the Company expects pro forma
net leverage to be at or below 3x combined EBITDA (before
synergies). The Company will continue to uphold its long-term
commitment to maintaining leverage below 3x Net Debt to EBITDA with
significant free cash flow generation driving de-leveraging.
Transaction Terms
Under the terms of the agreement, which has been unanimously
approved by both companies' Boards of Directors, Cementos Argos
will receive approximately 54.7 million shares of Summit stock and
approximately $1.2 billion in cash,
subject to closing adjustments, valuing Argos USA at approximately $3.2 billion based on Summit's closing share
price of $36.00 as of September 6, 2023. Cementos Argos will own
approximately 31% of the combined company on a fully diluted basis
upon the closing of the transaction.
Cementos Argos will enter into a shareholder agreement with
Summit at closing of the transaction pursuant to which Cementos
Argos will be subject to certain standstill provisions and a
24-month lock-up period on sales of Summit shares.
Management, Board of Directors
Following the closing of the transaction, the combined company
will be led by Anne Noonan, Summit's
President and CEO. At closing, the combined company will continue
to operate as Summit Materials and continue to trade on the NYSE
under the ticker symbol "SUM."
The Summit Board of Directors is expected to comprise eight
Summit-appointed representatives and three representatives
appointed by Cementos Argos.
Financing
Committed financing for the transaction, in the form of a bridge
loan to finance the cash consideration is being provided by Morgan
Stanley. Permanent financing expected to be jointly arranged by
Morgan Stanley and BofA Securities.
Timing and Approvals
The transaction is expected to close in the first half of 2024,
subject to customary closing conditions, including regulatory
approvals and approval by Summit Materials shareholders.
Advisors
Morgan Stanley & Co. LLC is acting as financial advisor and
Davis Polk & Wardwell LLP is
acting as legal counsel to Summit Materials.
Webcast and Conference Call Information
Summit Materials will host an investor conference call today,
September 7, 2023, at 8:00 a.m. eastern time (6:00 a.m. mountain time) to discuss today's
announcement and conduct a question-and-answer session.
A webcast of the conference call and accompanying presentation
materials will be available in the Investors section of Summit's
website at investors.summit-materials.com or at the following link:
https://events.q4inc.com/attendee/975577122.
To participate in the live teleconference:
Domestic
Live:
|
1-888-330-3416
|
International
Live:
|
1-646-960-0820
|
Conference
ID:
|
1542153
|
About Summit Materials
Summit Materials is a leading
vertically integrated materials-based company that supplies
aggregates, cement, ready-mix concrete and asphalt in the United States and British Columbia, Canada. Summit is a
geographically diverse, materials-based business of scale that
offers customers a single-source provider of construction materials
and related downstream products in the public infrastructure,
residential and nonresidential end markets. Summit has a strong
track record of successful acquisitions since its founding and
continues to pursue growth opportunities in new and existing
markets. For more information about Summit Materials, please
visit www.summit-materials.com.
About Cementos Argos S.A
Cementos Argos is a growing
multinational company, producer and distributor of cement,
concrete, and aggregates. With nearly 90 years of history, it has a
presence in sixteen countries and territories. Thanks to its
installed capacity, value creation for its stakeholders, constant
innovation, and commitment to sustainability, Argos is a leader in
Colombia and has become a
significant player in the industry in the Americas. It has nearly
7,000 employees, 11 integrated cement plants, 197 concrete plants,
7 aggregate plants, 9 clinker grinding mills, 29 ports and
terminals, almost 1,700 mixer trucks, over 1,500 train wagons, and
4 vessels of its own. Its total installed capacity is 24 million
tons of cement, and in 2022, it exported to 25 destinations. For
more information, you can visit www.argos.co.
Non-GAAP Financial Measures
The Securities and Exchange Commission ("SEC") regulates the use
of "non-GAAP financial measures," such as Adjusted Net Income
(Loss), Adjusted Diluted Net Income, Adjusted Diluted EPS, Adjusted
EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross Profit,
Adjusted Cash Gross Profit Margin, Free Cash Flow, Net Leverage and
Net Debt which are derived on the basis of methodologies other than
in accordance with U.S. generally accepted accounting principles
("U.S. GAAP"). We have provided these measures because, among other
things, we believe that they provide investors with additional
information to measure our performance, evaluate our ability to
service our debt and evaluate certain flexibility under our
restrictive covenants. Our Adjusted Net Income (Loss), Adjusted
Diluted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, Further
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Cash Gross
Profit, Adjusted Cash Gross Profit Margin, Free Cash Flow,Net
Leverage and Net Debt may vary from the use of such terms by others
and should not be considered as alternatives to or more important
than net income (loss), operating income (loss), revenue or any
other performance measures derived in accordance with U.S. GAAP as
measures of operating performance or to cash flows as measures of
liquidity.
Adjusted EBITDA, Adjusted EBITDA Margin, and other non-GAAP
measures have important limitations as analytical tools, and you
should not consider them in isolation or as substitutes for
analysis of our results as reported under U.S. GAAP. Some of the
limitations of Adjusted EBITDA are that these measures do not
reflect: (i) our cash expenditures or future requirements for
capital expenditures or contractual commitments; (ii) changes
in, or cash requirements for, our working capital needs;
(iii) interest expense or cash requirements necessary to
service interest and principal payments on our debt; and
(iv) income tax payments we are required to make. Because of
these limitations, we rely primarily on our U.S. GAAP results and
use Adjusted EBITDA, Adjusted EBITDA Margin and other non-GAAP
measures on a supplemental basis.
Adjusted EBITDA, Further Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted Cash Gross Profit, Adjusted Cash Gross Profit
Margin, Adjusted Net Income (Loss), Adjusted Diluted Net Income,
Adjusted Diluted EPS, Free Cash Flow, Net Leverage and Net Debt
reflect additional ways of viewing aspects of our business that,
when viewed with our GAAP results and the accompanying
reconciliations to U.S. GAAP financial measures included in the
tables attached to this press release, may provide a more complete
understanding of factors and trends affecting our business. We
strongly encourage investors to review our consolidated financial
statements in their entirety and not rely on any single financial
measure. Reconciliations of the non-GAAP measures used in this
press release are included in the attached tables.
Cautionary Statement Regarding Forward-Looking
Statements
These materials include "forward-looking statements" within
the meaning of the federal securities laws, which involve risks and
uncertainties. Forward-looking statements include all statements
that do not relate solely to historical or current facts, and you
can identify forward-looking statements because they contain words
such as "believes," "expects," "may," "will," "outlook," "should,"
"seeks," "intends," "trends," "plans," "estimates," "projects" or
"anticipates" or similar expressions that concern our strategy,
plans, expectations or intentions. All statements made relating to
our estimated and projected earnings, margins, costs, expenditures,
cash flows, growth rates and financial results are forward-looking
statements. Such forward-looking statements include but are not
limited to statements about the benefits of the proposed
transaction between Summit Materials and Cementos Argos S.A.(the
"Transaction"), including future financial and operating results,
the combined company's plans, objectives, expectations and
intentions, and other statements that are not historical
facts.These forward-looking statements are subject to risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements. We derive many of our forward-looking
statements from our operating budgets and forecasts, which are
based upon many detailed assumptions. While we believe that our
assumptions are reasonable, it is very difficult to predict the
effect of known factors, and, of course, it is impossible to
anticipate all factors that could affect our actual results. In
light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by us or any
other person that the results or conditions described in such
statements or our objectives and plans will be realized. Important
factors could affect our results and could cause results to differ
materially from those expressed in our forward-looking statements,
including but not limited to the factors discussed in the section
entitled "Risk Factors" in Summit Materials Annual Report on Form
10-K for the fiscal year ended December 31,
2022, as filed with the SEC, and any factors discussed in
the section entitled "Risk Factors" in any of our subsequently
filed SEC filings; and the following:
- the occurrence of any event, change, or other circumstance that
could give rise to the right of one or both of the parties to
terminate the definitive transaction agreement between us
and Cementos Argos S.A.;
- the outcome of any legal proceedings that may be instituted
against us or Cementos Argos S.A.;
- the possibility that the Transaction does not close when
expected or at all because required regulatory, shareholder, or
other approvals and other conditions to closing are not received or
satisfied on a timely basis or at all (and the risk that such
approvals may result in the imposition of conditions that could
adversely affect the combined company or the expected benefits of
the Transaction);
- the risk that the benefits from the Transaction may not be
fully realized or may take longer to realize than expected,
including as a result of changes in, or problems arising from,
general economic and market conditions, interest and exchange
rates, monetary policy, laws and regulations and their enforcement,
and the degree of competition in the geographic and business areas
in which we and Cementos Argos S.A.operate;
- the ability to promptly and effectively integrate our business
and the businesses of Cementos Argos S.A.;
- the possibility that the Transaction may be more expensive to
complete than anticipated, including as a result of unexpected
factors or events;
- reputational risk and potential adverse reactions of our
or Cementos Argos S.A.'s customers, employees or other
business partners, including those resulting from the announcement
or completion of the Transaction;
- the dilution caused by our issuance of additional shares of
capital stock in connection with the Transaction;
- the diversion of management's attention and time from ongoing
business operations and opportunities on Transaction-related
matters; and
- the impact of the global COVID-19 pandemic on our or Cementos
Argos S.A.'s businesses, the ability to complete the Transaction or
any of the other foregoing risks.
All subsequent written and oral forward-looking statements
attributable to us, or persons acting on our behalf, are expressly
qualified in their entirety by these cautionary statements. Any
forward-looking statement that we make herein speaks only as of the
date of these materials. We undertake no obligation to publicly
update or revise any forward-looking statement as a result of new
information, future events or otherwise, except as required by
law.
Additional Information and Where to Find It
This communication does not constitute an offer to buy or sell
or the solicitation of an offer to buy or sell any securities.This
communication relates to the Transaction.In connection with the
Transaction, Summit Materials plans to file with the SEC a proxy
statement on Schedule 14A (the "Proxy Statement").This
communication is not a substitute for the Proxy Statement or any
other document that Summit Materials may file with the SEC and send
to its shareholders in connection with the Transaction.The issuance
of the stock consideration for the Transaction will be submitted to
Summit Materials shareholders for their consideration.Before making
any voting decision, Summit Materials shareholders are urged to
read all relevant documents filed or to be filed with the SEC,
including the Proxy Statement, as well as any amendments or
supplements to those documents, when they become available, because
they will contain important information about Summit Materials and
the Transaction.
Summit Materials shareholders will be able to obtain a free copy
of the Proxy Statement, as well as other filings containing
information about Summit Materials, free of charge, at the SEC's
website (www.sec.gov).Copies of the Proxy Statement and other
documents filed by Summit Materials with the SEC may be obtained,
without charge, by contacting Summit Materials through its website
at https://ir.Summit Materials.com/.
Participants in the Solicitation
Summit Materials, its directors, executive officers and other
persons related to Summit Materials may be deemed to be
participants in the solicitation of proxies from Summit Materials
shareholders in connection with the Transaction.Information about
the directors and executive officers of Summit Materials and their
ownership of common stock of Summit Materials is set forth in
Summit Materials annual report on Form 10-K for the fiscal year
ended December 31, 2022, which was
filed with the SEC on February 16,
2023 and in its proxy statement for its 2023 annual meeting
of stockholders, which was filed with the SEC on April 10, 2023.Additional information regarding
the participants in the proxy solicitation and a description of
their direct and indirect interests, by security holdings or
otherwise, will be included in the Proxy Statement and other
relevant materials to be filed with the SEC in connection with the
Transaction when they become available.Free copies of these
documents may be obtained as described in the preceding
paragraph.
Summit Materials Company
Investor Contact: Andy Larkin (720)
618-6013
Media Contact: Karli Anderson
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SOURCE Summit Materials, Inc.