Granite announced that it has completed two acquisitions that strengthen its vertically-integrated home markets for a combined purchase price of $710 million, subject to customary closing adjustments.

Together, the acquisitions are expected to contribute approximately $425 million in revenue annually with an expected adjusted EBITDA margin of approximately 18 percent. This implies a blended multiple of approximately 9.2x expected adjusted EBITDA.

"We are excited to welcome Warren Paving and Papich Construction," said Kyle Larkin, Granite president and chief executive officer. "Their management teams have strong track records of success, and we look forward to combining our businesses. These acquisitions mark another significant step forward as we continue to grow our industry–leading, vertically-integrated business. With our strong cash generation and robust acquisition pipeline, I expect to continue to grow our home markets through bolt-on transactions and expansion into new markets."

Acquisition of Warren Paving Business

Warren Paving is a aggregates producer with vertically-integrated operations in the Mississippi River and Gulf Coast regions, operating a network of strategically located assets, including one quarry, one sand and gravel operation, 11 aggregate yards, three asphalt plants and a fleet of 168 owned and leased barges. This acquisition adds more than 400 million tons of aggregate reserves and resources and is a transformative opportunity to own and operate one of the largest and most attractive quarry and distribution networks in the Southeast, according to Granite.

Warren Paving's assets are highly complementary to Granite's southeastern platform's plant networks across Mississippi and is expected to generate annual revenue and adjusted EBITDA of approximately $275 million and $52 million, respectively, representing an expected adjusted EBITDA margin of approximately 19 percent, according to Granite.

Acquisition of Papich Construction Business

Papich Construction specializes in infrastructure projects, including road, rail and highway construction and supplies both internal projects and third-party customers with a full suite of asphalt and aggregates products, including sand, gravel and crushed rock. The acquisition includes a gravel mine, two quarries and two asphalt plants.

Strategic, Financial Rationale for Acquisitions

Strengthens vertical integration with enhanced scale: The acquisitions strengthen Granite's vertical integration in both the California and Southeast markets. The barge network in the Southeast presents significant opportunities to supply additional locations as we continue to expand and work to increase volumes.

Increases exposure to aggregates: These acquisitions increase Granite's aggregates reserves and resources by approximately 30 percent and annual aggregate production by approximately 5 million tons, or 27 percent.

Enhances financial profile: The acquisitions are expected to be immediately adjusted EBITDA margin accretive, with an estimated annual uplift of approximately 60 basis points driven by the increased aggregates exposure.

Capitalizes on strong financial position: The strength of our balance sheet and underlying operations, supplemented by the amended and restated credit facility position us to continue to invest in organic growth and strategic acquisitions.

Financing

The acquisitions were financed through a new 5-year $600 million term loan, $100 million of cash on hand and $10 million drawn on an upsized revolver of $600 million. Granite's pro forma net leverage ratio1 for an annual period, inclusive of the acquisitions, is well below its target of 2.5x.

"These acquisitions are in line with our capital allocation strategy and reinforce our focus on driving sustainable, long-term value creation for our shareholders," said Staci Woolsey, Granite executive vice president and chief financial officer. "Our cash generation and upsized credit facility allow us to continue to execute on high quality M&A transactions while maintaining a prudent leverage ratio."

For more information, visit graniteconstruction.com.