Why Summit Materials Stock Is Trading Lower Today

Summit Materials, Inc. SUM shares are trading lower after the company announced a combination with Argos North America Corp. (Argos USA), the U.S. operations of cement manufacturer Cementos Argos S.A. in a cash and stock transaction valued at $3.2 billion.

The combination of Summit and Argos USA will create the fourth-largest cement platform in the U.S. and accelerate Summit's 'Elevate Summit' strategy.

Under the deal, Cementos Argos will receive approximately $1.2 billion in cash (~40% of transaction value) subject to closing adjustments, and approximately 54.7 million shares of Summit stock (~60% of transaction value).

The transaction terms value Argos USA at approximately $3.2 billion based on Summit's closing share price of $36.00 as of September 6, 2023. 

Cementos Argos will own approximately 31% of the combined company on a fully diluted basis upon the closing of the transaction.

The company sees targeted synergies of more than $100 million annually.

Assuming a first-half 2024 close, the company expects pro forma net leverage to be at or below 3x combined EBITDA (before synergies). 

The combined company will be led by Anne Noonan, Summit's President and CEO. At closing, the combined company will continue to operate as Summit Materials and continue to trade on the NYSE under the ticker symbol "SUM."

As of July 1, 2023, Summit Materials had $230.0 million in cash and $1.5 billion in debt outstanding. The company's $395 million revolving credit facility has $374.1 million available after outstanding letters of credit. 

Price Action: SUM shares are trading lower by 7.92% to $33.15 on the last check Thursday.