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Why U.S. Concrete Stock Popped 30% Monday

By Howard Smith - Jun 7, 2021 at 11:48AM

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Strong construction growth has prompted a larger peer to pay a hefty premium to buy the concrete and aggregates supplier.

What happened

Shares of concrete and construction materials company U.S. Concrete (USCR) shot higher Monday after it announced it was being acquired by Vulcan Materials (VMC 1.41%) for $74 per share in cash -- a 30% premium over Friday's closing price. Shares immediately jumped to about that level, and remained up by 29% as of 11:30 a.m. EDT. 

So what

The purchase by its larger peer and supplier represents an equity value of almost $1.3 billion. The transaction, which has been approved by both boards of directors, is expected to close in the second half of the year. Demand for construction materials has been strong as the recovery progresses, with building activity accelerating in areas like data centers and warehouses.

Piles of stone aggregates at concrete facility.

Image source: Getty Images.

Now what

In its recently delivered first-quarter report, U.S. Concrete President and CEO Ronnie Pruitt stated: "We are optimistic about the business outlook, as we see improved demand for our products with strong residential activity, diversified commercial needs and resilient infrastructure projects, which should be enhanced by a national infrastructure bill."

Based in Texas, with 27 aggregates operations focused on California, Texas, and the Northeast, U.S Concrete's assets will complement Vulcan's existing business in some areas. It will also expand its presence in key growth areas of Texas, New York, and New Jersey. 

Vulcan has told investors it is taking an approach to adding value that includes organic investments, acquisitions, and greenfield developments. In a statement on the acquisition, Vulcan Chairman and CEO Tom Hill said, "U.S. Concrete is an important Vulcan customer in a number of key areas, and this transaction is a logical and exciting step in our growth strategy as we further bolster our geographic footprint."

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

U.S. Concrete, Inc. Stock Quote
U.S. Concrete, Inc.
USCR
Vulcan Materials Company Stock Quote
Vulcan Materials Company
VMC
$178.08 (1.41%) $2.47

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