On 23 August 2019 Brickworks announced that they acquired Sioux City Brick from private owners for US $32 million (AUD $47 million). This announcement comes after the company acquired America’s fourth largest brick maker Glen-Gery in November 2018 for AUD $151 million bringing Brickworks total American acquisition costs to just under AUD $200 million. The acquisition is funded with existing debt facilities and is expected to deliver 3% EPS accretion post realisation of cost synergies. Mark Mahoney, CEO of Sioux City Brick told the Sioux City Journal that Brickworks approached Sioux City with an unsolicited offer to purchase the company. Mahoney stated to Sioux City Journal that “We were not looking to sell, but the offer was — they’re looking to make an entry into the U.S. market…It was a strategic buy for them. These guys are coming in to consolidate part of the industry.”
As I have already discussed in my article about the North American brick industry and Brickworks acquisition of Glen-Gery, Sioux City Brick has three production lines located at two plants in Iowa and employs 200 people across its two plants and five company-operated retail distribution outlets. These two Iowa plants compliment Glen-Gery’s Redfield plant also located in Iowa and increases Brickworks’ share of the important Midwest market. Brickworks now owns 11 brick manufacturing plants and 1 stone manufacturing plant throughout the North East and Midwest regions of the United States which based on past sales brings Brickworks North American brick sales to around 320 million bricks per annum.
Update 8 September 2019: The Redfield Plant in Iowa is being closed. This is unsurprising considering that the Adel Plant is only 12km away from the Redfield Plant. The Adel Plant is part of Sioux City Brick while the Redfield Plant is part of Glen-Gery. This means that there will only be two operating brick plants in the state of Iowa – one in Sergeant Bluff and one in Adel – both now owned by Brickworks.
The closure of the Redfield plant comes after Glen-Gery announced in June 2019 that the Capitol Plant in Manassas, VA will be closing. The top 25 brick products from the Capitol Plant will now be made at Glen-Gery’s York, PA Plant. Chris Bagley, Capitol Plant Manager relocated to the York Plant to assist with the transition. The Capitol Plant operated on a seasonal basis while the York Plant operates year-round. Approximately 35 employees were effected. This makes Brickworks operations more efficient and enables the company to compete with alternative materials such as vinyl, engineered wood and fiber cement.
Sioux City Brick is one of the larger privately owned brick manufacturers with a production capacity of 160 million bricks per annum, although current production levels are only 90 million bricks. They focus on the premium architecture market. The current maximum production capacity is 100 million bricks per annum due to one production line currently being moth balled. Sioux City sells 90 million bricks per annum compared to 230 million bricks sold by Glen-Gery. On a price per brick sold basis, Brickworks paid 52 cents per brick for Sioux City compared to 65 cents per brick sold for Glen-Gery. Note that this metric is a fairly crude approximation of the value of Sioux City, obviously the profit per brick manufactured would be different for the two companies.
Sioux City also holds the exclusive distribution rights in the United States to the “Feldhaus” thin brick system. Considering Glen-Gery has limited expertise in thin-brick technology, this acquisition provides Brickworks improved access to the thin-brick market. Commenting on the acquisition Brickworks Managing Director Lindsay Partridge said:
“We are pleased to welcome Sioux City and it’s 200 staff to the Brickworks Group, and we look forward to building on the strong position it has established in the Midwest region of the United States. Sioux City’s manufacturing facilities are among the best we have seen in the United States, reflecting the company’s focus on production efficiency and their reputation for product quality.
The acquisition of Glen-Gery in November set the platform to pursue further growth in North America. Unlike Australia, the North American brick industry is highly fragmented, with significant over-capacity, and consists of numerous players operating at sub-optimal factory utilisation. As a result, targeted bolt-on acquisitions such as this allow plant utilisation and production efficiency to increase significantly, as operations are integrated.
The acquisition also strengthens our position in the architecturally focussed Midwest and Northeast regions of the United Sates. Through a prudent and targeted investment approach, and application of our operational expertise, we are confident that attractive returns will be achieved on our ongoing investment in this region.”
To read my in-depth analysis of Brickworks, click here.