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Brickworks share price on watch after US acquisition

The Brickworks Limited (ASX: BKW) share price is one to watch this morning after the company’s latest acquisition.

What did Brickworks announce this morning?

Brickworks has entered into a binding agreement to acquire the assets of Redland Brick Inc. for up to US$48 million (A$70 million).

The Aussie company plans to acquire the US-based brick maker through a United States subsidiary with US$35 million upfront. The acquisition includes 4 manufacturing sites across Maryland, Pennsylvania and Virginia with 80 million brick sales per year.

The Brickworks share price will be on watch this morning following the latest step in the company’s growth strategy.

The Redland Brick acquisition allows Brickworks to optimise production at its existing facilities while achieving significant synergies.

Brickworks is hoping to enhance its leadership position in northeast America, which is a key target for the company.

Several new, reputable brands are set to come under the company’s umbrella following the purchase.

The acquired assets will also include raw material reserves and 5 production lines across the 5 plants.

Purchasing Redland Brick also makes for a cost-effective and quicker option than building new plants in America.

Brickworks expects the transaction to close in February 2020.

How has the Brickworks share price performed in 2019?

It’s been a volatile year for the Brickworks share price so far in 2019. The company’s shares have edged 11.24% higher – a significant underperformance compared to the S&P/ASX 200 Index (INDEXASX: XJO) which is up 20.50% in 2019.

Brickworks shares jumped higher in September on the back of a record full-year profit result. The company’s shares are also up 5.80% in the last month in a comeback of sorts.

Brickworks is aggressively pursuing its US expansion as it pushes past 1,000 employees in the country.

The Aussie brick maker is anticipating revenues of circa A$290 million per annum on 400 million brick sales per year post-transaction.

The Brickworks share price will be one to watch this morning as investors take in the acquisition news. 

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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