LafargeHolcim Inks $3.4B Deal To Buy Firestone Building; Shares Rise 4.6%

LafargeHolcim has inked an agreement to snap up US-based commercial roofing company Firestone Building Products from Bridgestone Americas, in a deal valued at $3.4 billion. Shares jumped 4.6% in UK trading.

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The world’s largest cement maker will finance the acquisition with cash and debt while maintaining net debt below 2x. Following the transaction, LafargeHolcim (0QKY) projects to generate $110 million in annual synergies on a run-rate basis within two years of its closure, which is expected in the second quarter. The acquisition is earnings per share (EPS) accretive from the first year, the company said.

With this deal, LafargeHolcim seeks to expand its footprint in the US, its biggest market, and boost annual net sales to more than $6 billion.

Firestone Building Products, which specialises in commercial roofing and building envelope solutions in the US, had estimated net sales of $1.8 billion and EBITDA of $270 million in 2020.

“With Firestone Building Products we are strengthening our biggest market, the US, while also building a global growth and innovation platform for the company,” Jan Jenisch, LafargeHolcim’s CEO, commented. “Today’s milestone is a strategic leap on our journey to become the global leader in innovative and sustainable building solutions, to build a world that works for people and the planet.”

With this acquisition, LafargeHolcim will add 15 manufacturing facilities, 1,800 distribution points, and three R&D laboratories to its network.

Looking ahead, the cement maker said that it will be focusing on cross-selling opportunities and further bolt-on acquisitions to expand the flat roofing systems business to Europe and Latin America.

“A potential acquisition in this space should also boost the ESG [Environmental, Social, and Corporate Governance] credentials of the company as a supplier of energy saving products in the building and construction sector,” Citigroup Inc. analysts wrote in a note to investors. The investment bank recently raised the stock’s price target to €54.47 and reiterated a Buy rating. (See LafargeHolcim stock analysis on TipRanks)

With shares up 22% over the past three months, the stock still scores a Strong Buy analyst consensus based on 8 recent Buy ratings versus only 1 Hold. Meanwhile, the average price target of €51.46 implies upside potential of 7.9% over the coming 12 months.