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Adbri directors back $2.1 billion takeover

A consortium has formalised its bid to acquire Adelaide-based Adbri in a deal that values the building supplies business at $2.1 billion.

Feb 27, 2024, updated Feb 27, 2024
Photo: Don Brice/ adbri.com.au

Photo: Don Brice/ adbri.com.au

The directors of Adbri have unanimously recommended a takeover offer to shareholders that, if passed, would see the company owned by a consortium comprising two major building materials businesses.

Dublin-based CRH’s Australian subsidiary and Victorian building materials firm Barro Group formalised their bid for Adbri today, entering into a scheme implementation deal with the listed company under which shareholders will receive $3.20 per Adbri share in cash.

This represents a 41 per cent premium for shareholders, with the deal’s details released alongside the company’s full-year financial results seeing the company report a 13.1 per cent jump in revenue and an underlying profit of $111.7 million – up 43.8 per cent.

Barro Group is Adbri’s largest shareholder at 42.7 per cent, and two of Adbri’s directors are Barro family members – including Adbri chair Raymond Barro.

As such, an Independent Board Committee was established to consider the proposal in December. The Barros and Geoff Tarrant – another Barro representative – also recused themselves from the Adbri board while the proposal was under consideration.

The consortium would acquire all shares not currently owned by Barro Group.

“With the objective of maximising value for the independent shareholders, the IBC has negotiated binging documentation with CRH following completion of its confirmatory due diligence,” Adbri lead independent director Samantha Hogg said.

“The Adbri independent directors are unanimous in their view that the scheme will provide an attractive value outcome for independent shareholders if implemented.”

The deal remains subject to customary conditions including court and Foreign Investment Review Board (FIRB) approval, votes in favour from shareholders, and other conditions including “no material adverse change in respect of Adbri”.

A break fee of $21 million would also be payable to the CRH consortium, or a reverse break fee of the same amount to Adbri, if the deal is cancelled.

The company expects the deal to be implemented in June this year.

On the release of the financial results for the year ended 31 December, Adbri CEO Mark Irwin said the company recorded a “strong full year performance and continues to make significant progress on reshaping the business”.

“Our renewed leadership team is focused on delivering value through margin management and the efficient use of capital,” said Irwin, who will receive a healthy bonus to remain in the CEO position for an extra 10 weeks until mid-December.

“We delivered significant revenue and earnings growth, underpinned by improved customer experience and pricing.

“Our performance reinforces that we are building a strategically positioned, disciplined and responsive organisation.”

Statutory net profit after tax was down by 9.5 per cent to $92.9 million, and no dividend was declared while an upgrade of its Kwinana cement project in Western Australia continues.

That project will see Adbri build a state-of-the-art facility that consolidates its two existing cement production sites, which the company hopes will “strengthen Adbri’s long-standing position as a sustainable, low-cost cement supplier in Western Australia”.

“We expect our Kwinana Upgrade Project to be operational by the end of 2024, supporting operational efficiencies and is well positioned for future growth in market demand,” CEO Irwin said today.

The company attributed its revenue growth to “improved pricing discipline across product lines and modest volume growth” while underlying earnings growth of 30.9 per cent was driven by “strong demand for our cement, concrete and aggregates products across key markets, with pricing and cost discipline supporting the improved earnings”.

By division, concrete saw the biggest earnings spike in FY23 – up 20.3 per cent – after benefitting from price increases and higher demand across most regions except for Queensland.

It was followed by the aggregates division (revenue up 19.6 per cent), and lime (revenue up 9.6 per cent).

Cash flow also improved by $48.6 million to $215 million thanks to increased profitability, and net debt also increased by $105.7 million to $682.1 million representing a leverage ratio of 2.2 times underlying earnings. This is outside the company’s target range thanks to expenditure at the Kwinana project.

The company said for 2024 it “expects demand for its products, with the exception of lime, to remain strong and broadly in line with FY23”.

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