TRG | The Bottom Line – 9/27

As the week came to a close, Vulcan Materials (VMC) announced the acquisition of privately-owned Wake Stone, a pure-play aggregates producer in the Carolinas. Going into the announced acquisition, North Carolina (NC) accounted for ~5% of VMC revenues, and South Carolina (SC) ~4%. We estimate that Wake Stone is slightly smaller than Knife River (KNF – #19 at ~30MM tons) but larger than Albert Frei (#51 at ~4MM tons, was acquired by MLM). Wake Stone’s footprint is across NC and SC, with a notable presence in Raleigh. Founded in 1970, Wake Stone operates five quarries and maintains 60+ years of hard rock reserves. The Carolinas is typically a high dollar, high margin market for rock producers, and we expect Wake Stone to be a benefit to VMC’s overall ASP. The Carolinas is also in close proximity to data center alley due to the location of internet sea cables, and we expect that the construction outlook for heavy non-res type projects was a factor in acquiring Wake Stone. The reindustrialization and onshoring activity that we believe will be a decade long tailwind should see meaningful activity in this East Coast area. Financials were not disclosed, and the deal is expected to close later this year. Because of the high-quality, aggregate pure-play, we expect the purchase multiple to be at least in the mid-teens.