Source: Eagle Materials Inc., Dallas; Lafarge Group, Paris; Staff reports

Eagle Materials announced recently that the company has entered into a definitive agreement with Lafarge North America to purchase for $446 million Lafarge's Sugar Creek, Mo., and Tulsa, Okla., cement operations, as well as related assets, which include six distribution terminals, two aggregates quarries, eight ready-mixed plants and a fly ash business, all of which generated about $178 million in the fiscal year ended June 30.

Eagle will also enter into a transition sales agreement to supply certain Lafarge operations with cement for four to five years, and an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations. The acquisition will increase Eagle's U.S. cement capacity by about 60 percent (or 1.6 million metric tons) and is expected to close by December 2012, pending regulatory approvals.

Eagle has existing integrated operations in central Texas and northern California. Its cement portfolio spans Illinois, Nevada, Texas and Wyoming mills, plus California, Colorado, Nebraska, Texas, Utah and Wyoming terminals.

Steven Rowley, Eagle Materials Inc. President and Chief Executive Officer, said the agreement represents a major milestone event for the company. "Our stated strategy has been to grow the cement and aggregates side of our business," he explained. "Our first priority has been to acquire cement plants that connect but do not overlap with the market reach of our existing plants. These two Lafarge plants are a compelling fit with our objectives—and the transaction meets our stringent criteria for new investment.

"These assets will allow us to participate more fully in the U.S. construction industry recovery; additionally this transaction further positions the company near energy growth markets, where there is growing demand for our specialty oil well cement along with our newly-offered northern white frac sand. These new cement, concrete and aggregates assets will immediately contribute earnings and cash flow for our stockholders; moreover they will provide significant near-term opportunities for synergies and earnings growth."

The Eagle deal is the third in 18 months to see Lafarge NA retreat from a major integrated cement and ready mixed position. In May 2011, it announced a $760 million sale of cement plants in Harleyville, S.C., and Roberta, Ala. (representing 3.2 million metric tons of cement capacity), a grinding station in Atlanta and ready-mixed facilities in the Southeast to Colombia-based Argos USA. Five months later, the company effected an asset swap—plus undisclosed cash considerations—netting Martin Marietta Materials the Denver-based Front Range ready mixed and aggregate businesses. Following the Eagle transaction, Lafarge NA will have nine cement milling or grinding operations representing 11 million tons’ annual capacity; strong regional aggregate and ready mixed businesses in markets including New York, Maryland and Louisiana markets; and, commanding positions across Canada.

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