Aggregate Industries Plc Business Information, Profile, and History

Company Perspectives:

The Group seeks to utilise its scale and strong asset base to deliver superior shareholder value by continuously improving margins from its existing businesses; adding to them by acquiring value enhancing bolt-on acquisitions and continuously strengthening its mineral reserves positions.

History of Aggregate Industries Plc

Anglo-American group Aggregate Industries plc is a leading producer of aggregates, stone and paving products and concrete products. In the United Kingdom, the company holds the number five position in its overall market, while in the United States the company has quickly risen to a number six position, and this despite the company's focus on regional rather than national operations. The product of the 1997 merger between the Bardon Group and Camas, Aggregate Industries is itself an aggregate of a long list of acquisitions--since 1998 the company has spent more than US$300 million acquiring more than 23 companies, primarily located in the company's U.S. focus regions of Massachusetts, Minnesota, North Dakota, the Mid-Atlantic region (Maryland, Virginia, Washington, D.C.), Colorado, and Michigan. In the United Kingdom, Aggregate Industries concentrates on the Southwest, Midlands, and northern England regions and Scotland, with a network of more than 20 factories. The company's reserve holdings include sites at the Leicestershire super quarry. Aggregate Industries' aggressive growth drive in the United States coincides with declining infrastructure spending in the United Kingdom and the massive US$200 billion federal budget earmarked for improvements to the U.S. roads, bridges, and highway system. One of the leaders of the consolidation wave in the aggregates industry, the company has built up more than three billion tons of consented stone reserve quarries in the United Kingdom and in the United States, which alone accounted for 1.7 billion tons of consented stone reserves, giving the company more than 20 years' worth of raw materials reserves. After failing in its reverse takeover attempt of rival Tarmac (subsequently merged with Anglo American Ltd.), Aggregate Industries has contented itself with a policy of growth through acquisition, which enabled the company to raise its annual sales to £933 million (US$1.5 billion) in 1999. More than half of the company's sales are generated in the United States; the United Kingdom accounts for most of the remaining sales, although the company does some business in the rest of Europe, particularly in Norway, where Aggregate Industries operates an undersea quarrying business. In January 2000, all of the company's operations--which previously traded under the Bardon, Camas, and other names--were regrouped under two divisions, Aggregate Industries US and Aggregate Industries Europe. Aggregate Industries is led by CEO Peter Tom.

An Aggregates Aggregate in the 1990s

The formation of Aggregate Industries represented the result of a long string of mergers and acquisitions made primarily during the aggregates industry's consolidation wave in the early 1990s. The chief components of the merger were the Bardon Group and Camas, the quarrying, sand, and gravel concern spun off from English China Clays in 1994. Another component of the company was Evered Plc., founded in 1922, one of the early entrants in the United Kingdom's aggregates industries. Evered, however, found itself in trouble at the start of the 1990s, particularly after its £138 million acquisition of subsea quarrying unit Civil & Marine Ltd.

The popularization of the automobile as a transportation means brought on an increasing demand for aggregates and new concrete products needed for building national road, bridge, and highway systems. For much of the 20th century, quarrying and processing of aggregates remained a highly fragmented industry, with many small and mid-sized producers supplying largely local and regional markets. One of these companies was Bardon Hill Quarries Limited, which operated a granite quarry at Charnwood Forest, the Leicestershire super quarry. Joining Bardon Hill in 1956 was Peter Tom, who later took over leadership of the company and helped build it into one of the United Kingdom's largest in the industry. Despite taking Bardon public with a listing on the London stock exchange in 1988, the Tom family's stake remained at nearly 60 percent of Bardon Hill into the early years of the 1990s.

Another of the Aggregate Industries founding companies was also taking shape by the early 1990s. English China Clay, which specialized for much of the century in the mining of kaolin--the fine white clay used for making porcelain and a variety of other uses--had branched out into more diversified quarrying and aggregate product areas, with operations including sand, gravel, building block, and crushed rock production. In 1994, however, English China Clay, which had been attempting to transform itself into a specialty chemicals company--before being taken over by France's Imetal--spun off its aggregates interests into a new company, Camas, which was led by CEO Alan Shearer. With operations in the United States, Camas also owned a quarry at the Leicestershire super quarry site.

Camas, which joined the market as the United Kingdom's fifth largest aggregates producer, was part of a new wave of aggregates companies amidst an industry hard hit during the protracted economic crisis in the United Kingdom. Helping to lead the consolidation was Bardon Hill, led by Peter Tom. In 1991, Bardon Hill merged with Evered Plc. to form Evered Bardon Plc. The merger created an entity of more than 15 member companies--including quarrying operations in the United States--and took a position as one of the United Kingdom's industry leaders. A year after the merger, the company changed its name to the Bardon Group.

By then, however, the Bardon Group was having its own financial difficulties. In 1992, the company posted some £8 million in losses. The company attempted to sell the Civil & Marine subsidiary inherited from Evered in order to reduce the company's debt level. But, facing a collapsing market, the sale was halted, forcing the company to write off some £63 million and sinking it deeper into the red, to the tune of £28 million. The Civil & Marine sell-off was not completed until 1995.

The aggregates markets in both the United Kingdom and United States began to rebound toward the middle of the 1990s, leading to a new wave of industry consolidations. The Bardon Group showed itself an aggressive mover, particularly in the United States, where its acquisitions included EL Gardner in 1996, and AH Smith, Mid Atlantic Materials, and assets of Solite, boosting the company's Mid-Atlantic regional presence. Bardon had also built a strong presence in the Massachusetts area. The spinoff of Camas from English China Clays in 1994 set the stage for the emergence of a new major player in both the European and North American aggregates markets.

Aggressive Aggregates for the 21st Century

By the mid-1990s, the Bardon Group had grown to sales of more than £317 million. Camas itself had reached sales of more than £338 million. The two companies' operations were largely complementary--which led to merger talks in 1996. After a year of negotiations--held up by disagreements between Peter Tom and Alan Shearer over which CEO was to lead the merged entity--the deal was struck in 1997. Tom had won the battle for the CEO seat in what was described as a reverse takeover--while Shearer, only two years from retirement, agreed to walk away with a £500,000 settlement. The new company was given a new name, Aggregate Industries--suggesting the company's intention to be an aggressive player in the consolidating aggregates industry. The combination of the company's operations already gave it a strong position in both the United Kingdom and the United States, where the company could claim leadership status in four major regions.

By 1998, Aggregate Industries was set to become a powerhouse in the aggregates industry. Already during the year, the company had made a number of acquisitions, including that of Douglas Concrete. Then the company confirmed that it had spent more than a year in talks with rival aggregates group Tarmac plc to merge the two companies. Yet these talks, too, had stumbled on the question of company leadership&mdash Tom, gambling on shareholder impatience to see the deal through, insisted that Tarmac give up management control of the merged company, despite Tarmac being the larger player.

Tarmac refused, and the deal died at the end of 1998. Instead, Aggregate Industries adopted a new strategy, that of an aggressive campaign of acquisitions of smaller companies, and especially in order to build up leadership positions in its target U.S. regions--which now included Michigan. As such, Aggregate Industries expected to capitalize on the massive US$216 billion infrastructure spending plan announced by Congress in 1998, calling for repairs and new construction for U.S. roads, bridges, and highways.

Aggregate Industries was by then launching its own massive spending plan--in 1998 and 1999 the company spent more than US$300 million on acquisitions. A major acquisition came in 1998 when the company spent US$53 million acquiring Bill Smith Sand & Gravel, giving the company a strong entry into the Michigan market. The following year, however, proved to be the company's most aggressive, as Aggregate Industries spent some US$230 million in ten strategic acquisitions, including Hammer Group of Colorado, for US$18.7 million in February 1999, and Golden's, also in Colorado, in November for US$61.5 million.

By the beginning of 2000, Aggregate Industries' operations in the United States had topped its U.K. operations in terms of sales. The robustness of the U.S. economy and the high level of fragmentation in the industry there made that market a top target for the company's future growth. In order to present a unified presence, the company decided to change all of the names of its U.S. subsidiaries under the single Aggregate Industries name. The company also continued its acquisition drive, picking up ten new companies in the first half of the year, including Holst Excavating, Mobilcrete and Sioux Valley Ready Mix, in Minneapolis and Michigan Colprovia Company.

Aggregate Industries looked forward to making more acquisitions, with a promise to spend another £50 million in the second half of 2000. Moreover, the company could even look forward to acquiring parts of Tarmac after all. After the takeover of Tarmac by Anglo-American Inc., the minerals giant was said to be seeking to sell off Tarmac's U.S.-based aggregates operations. That move fit right into Aggregate Industries' plans to build itself into a major aggregates leader through an aggressive acquisition program in the new century.

Principal Subsidiaries: Aggregate Industries US; Aggregate Industries Europe.

Principal Competitors: Boral Limited; Holnam Inc.; Cemex SA de CV; Lafarge SA; CRH; Martin Marietta Materials; Essroc; Southdown, Inc.; Florida Rock Industries; Taiheiyo Cement; Giant Cement Holding, Inc.; Titan Cement Company; Holderbank; Vulcan Materials Company.

Chronology

• Key Dates:

• 1922: Evered Plc is founded.
• 1956: Peter Tom joins Bardon Hill Quarries Limited.
• 1988: Bardon Hill goes public.
• 1990: Evered acquires Civil & Marine.
• 1991: Evered and Bardon Hill merge to form Evered Bardon.
• 1993: Company changes name to Bardon Group.
• 1994: Camas is spun off from English China Clay.
• 1995: Bardon Group sells Civil & Marine.
• 1997: Bardon Group and Camas merge to form Aggregate Industries.
• 1998: Company aborts proposed merger with Tarmac plc.
• 1999: Aggregate Industries begins acquisition spree.
• 2000: Company changes name of all U.S. operations to Aggregate Industries US.