Construction Materials
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USG
BRK.B |
USG: With the help of Buffett (once again), another US company is snagged by a foreign buyer. The global mergers and acquisitions story reads a lot like global trade in that it is often a one-way street: rarely does the US intervene when a foreign entity wants to acquire a US company, but the barriers to a US company acquiring a foreign firm are often insurmountable. We have noticed that Warren Buffett often seems to be a cheerleader for the former deals, from Brazil's 3G Capital acquiring Heinz and Kraft, to the most recent one: Germany's Knauf KG gobbling up building materials firm USG (USG $26-$43-$43) for $7 billion. USG, formerly the United States Gypsum Company, has a rich history dating back to 1902, when 30 independent gypsum rock and plaster manufacturing companies merged to create a building powerhouse. Today, USG is a $6 billion company (well, $7 billion after the takeover bid) which manufactures and sells building materials around the world. "Sheetrock" is a USG brand, for example. Buffet's involvement? His Berkshire Hathaway owns 31% of the firm's outstanding shares, and that block is voting in favor of the deal. Under the terms of the agreement, current USG shareholders will receive $44 per share. That will certainly be a nice payday for Buffett's firm and its investors. We are sure he will stick around to make sure that Knauf keeps the USG headquarters in Chicago, and keeps the majority of the company's 6,800 workers employed.
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EXP
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Under the Radar: Eagle Materials
(12 Oct 2017) Eagle Materials (EXP $74-$109-$111) is a $5.3 billion mid-cap supplier of building products for use in residential, industrial, and infrastructure projects. The company operates in five different segments, from cement and aggregates to oil and gas proppants (materials designed to keep an induced hydraulic fracture open). With sales of $1.2 billion last year, the company recorded net profits of $200 million. It is noteworthy that the company has also been profitable every year for the past decade. There are around one million homes in need of repairs from the recent hurricanes; Eagle Materials will provide a good portion of the supplies needed. |
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OC
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(20 Jun 2017) Stock of the Day. Quiz: what do all of those new homes going up around you have in common? There are plenty of builders to choose from when trying to take advantage of the housing boom, but there is one company that virtually all of them use for certain materials: Owens Corning (OC $46-$66-$66). The Pink Panther company makes insulation, roofing materials, and composites (think stone veneer on the fronts of those new homes) that are used by virtually all homebuilders around the country. With a market cap of just $7.4 billion, there is plenty of room for this mid-cap to grow, and the numbers are pointing to a strong 2017 for the firm. If the $1 trillion infrastructure plan comes to fruition, expect OC to reap a windfall. The company had profits of $393 million last year on revenues of $5.7 billion.
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