A split for Eagle Materials

5/30/2019
Eagle Materials announced that, following a review of its portfolio, the company plans to separate its heavy materials and light materials businesses into two independent, publicly traded corporations through of a tax-free spin-off to Eagle shareholders.

The separation is expected to be completed in the first half of calendar 2020.

The company also announced that it is actively pursuing alternatives for its oil and gas proppants business with the support of an independent financial advisor. Additionally, the company’s board said it will continue to evaluate any opportunity “to create value that may arise prior to completion of the separation,” Eagle Materials said.

After the separation, Eagle said its existing heavy materials business, a cement-plant system with complementary concrete and aggregates operations, is expected to continue to produce strong margins and significant cash flows. Eagle also said it will remain focused on low-cost production, operate in key U.S. geographies with favorable market dynamics and drive profitable growth through both strategic acquisitions and the organic development of its asset network.

Eagle’s existing light materials business is expected to continue to be a benchmark producer of gypsum wallboard and recycled paperboard, Eagle reported. The business includes an integrated paperboard mill that utilizes advanced technologies to supply the wallboard plants with high-performing, low-cost facing paper.

“The Eagle board and management team believe this separation will provide each of the businesses with the financial flexibility to pursue its own growth strategies and operating priorities, and will develop the appropriate capital structure and allocation priorities to generate long-term growth for all shareholders,” said Eagle Materials Chairman Mike Nicolais.

Following the completion of the separation, each company will have its own management team and an independent board of directors that will include members of the current Eagle Board. Full management teams and boards for both companies will be named in the months leading up to the formal separation.

Based in Dallas, Texas, Eagle Materials manufactures and distributes cement, gypsum wallboard, recycled paperboard, concrete and aggregates, and oil and gas proppants from more than 75 facilities across the country.

Earlier this month, Eagle Materials reported fourth quarter 2019 revenue of $284.7 million, flat compared to revenue in the fourth quarter 2018. For the full year, Eagle posted revenue of $1.39 billion, up just 0.5% from full year 2018 revenue of $1.38 billion.

In March, Eagle announced that an executive transition was underway. CEO Dave Powers will retire as an officer of the company, effective July 1. According to a previous report from the company, Powers will remain on the board of directors and will be succeeded as CEO by Michael Haack, currently president and COO at Eagle.

 

 
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