Breedon Aggregates (BREE) took another step along its stated path of consolidating the fragmented UK aggregates industry with a conditional agreement to buy Hope Construction Materials from Cortolina Investments for £336m. Hope is a construction materials supplier with 152 concrete plants and five quarries in the UK, and in the year to June it generated revenue of £286m and cash profits of £37m.
The deal will be financed through an equity placing of £41m and through the issue of 259m shares to Abicad Holding, an associated company of the seller which, upon completion, will own around 18 per cent of Breedon's enlarged share capital. Under the deal, Amit Bhatia, Hope's chairman, will join the Breedon board. The deal will be subject to approval by the UK Competition and Markets Authority, and is expected to complete in the second half of 2016.
Following completion, the acquisition is expected to be double-digit accretive to the enlarged group's underlying earnings per share in the first full year, and Breedon expects to achieve annual cost synergies of around £10m by the third full year.
Breedon also delivered an upbeat trading statement covering the first 10 months of the year, which reported aggregate sales up by 19 per cent, asphalt up 23 per cent and concrete by 20 per cent. Turnover in the first 10 months grew by nearly a quarter and full-year profits are now expected to be at the top end of market expectations.
Peel Hunt has upgraded its price target to 75p, and expects full-year adjusted pre-tax profits of £32m and EPS of 2.3p, rising to £46m and 3.3p the year after.
