HeidelbergCement's U.S. Acquisition Improves Argument for Multiple Rerating; FVE Maintained

Narrow-moat HeidelbergCement has announced the acquisition of Corliss Resources, one of the largest aggregates and ready-mixed concrete companies in the U.S. Pacific Northwest. We support the acquisition, which increases the quality of the group’s earnings stream due to higher barriers to entry in the United States and our preference for aggregates, which exhibit less cyclicality and lower carbon intensity. We view the transaction multiple of 9 times enterprise value/EBITDA as fair and more favorable than the significant disposal of HeidelbergCement’s U.S. West assets to Martin Marietta. The acquisition will not have a material impact on the financials; however, we believe similar acquisitions will help improve the argument for a multiple rerating if the product mix shifts towards aggregates from out-of-favour cement operations. We maintain our EUR 81 fair value estimate and view the shares as undervalued.