Brickworks cements US operations with $70m distribution acquisition

Brickworks is cementing its position in the US with the $US51.1m acquisition of the largest brick distributor in America.

Brickworks managing director Lindsay Partridge. Picture: Hollie Adams

Brickworks has cemented its position as one of the largest brickmakers and distributors in the US, particularly through the northeast of the country, after announcing a deal to buy a brick distribution business from Southfield Corporation for $US51.1m ($70m).

The acquisition will lift Brickworks’ already sizeable turnover in the US by 40 per cent and transforms it into the largest brick distributor in America, complementing its current stature as the third-largest brickmaker, as well as giving it a crucial distribution network into key stakeholders such as architects and builders.

Brickworks announced after the market closed on Monday that it had entered into a binding agreement to acquire certain assets of Southfield Corporation, including Illinois Brick Company.

Illinois Brick is the largest independently owned and operated brick distributor in the US, with 17 showrooms and distribution outlets across Illinois and Indiana.

The acquisition is strategically positioned to support Brickworks’ growth strategy in North America, and will build scale and fills the gap within its Glen-Gery’s existing direct distribution network.

The Illinois Brick business has annual turnover of more than $US100m and has delivered consistent earnings for several years, with significant growth opportunities and cost synergies available to Brickworks, the brickmaker said. The acquisition is expected to deliver 2 per cent earnings per share accretion in its first year, excluding cost synergies and growth initiatives.

“This strengthens dramatically in Iowa and Illinois our distribution where we were a bit soft, and the interesting thing about it is this distributor is based around Chicago, which is a historic brick town, and they are the biggest distributor in the US and that gives us incredible influence in that market to put our products in there,” Brickworks managing director Lindsay Partridge said.

“In America a big percentage of the bricks are distributed by distributors and if you haven’t got that way to get to the market yourself, well it gives you a bit of a disadvantage. We then can get them to the builders and the architects and the people we want to talk to.

“We currently lack a direct distribution presence in these states and as such this acquisition is a logical strategic fit.”

Mr Partridge said the deal took 18 months to negotiate as the Covid-19 pandemic delayed the agreement.

He said the sales volume through the Illinois Brick network would underpin production volume at its Midwest plants, which had ample capacity to accommodate additional sales growth.

“The outlook for the region is strong, with building activity expected to increase over the next five years, across both residential and non-residential segments. Recently announced government stimulus, including support for state and local infrastructure projects such as schools and universities, is also expected to boost construction activity in the region.”

Mr Partridge said although the pandemic had hit its US operations hard over the past year, with the vaccine program now well advanced, and the economy reopening, he was seeing a strong recovery in demand.

“We continue to see the North American brick industry as a highly attractive long-term growth opportunity for Brickworks with a positive market outlook,” Mr Partridge said.

Originally published as Brickworks cements US operations with $70m distribution acquisition