Construction Partners Inc. acquired Asphalt Inc. of Austin, known as Lone Star Paving, for $654 million and 3 million shares. The deal brings in $530 million in revenue and $120 million in adjusted EBITDA, expanding CPI's reach to high-growth markets in central Texas. Acquisition is expected to close in Q1 of fiscal year 2025.
Construction Partners Inc., a civil infrastructure company specializing in the construction and maintenance of roadways across six Southeastern states, announced on Oct. 21 that it closed on its agreement to acquire Asphalt Inc. of Austin, Texas.
Asphalt Inc, which does business as Lone Star Paving, is an asphalt manufacturing and paving company operating in high-growth markets in central Texas, with 10 hot-mix asphalt plants, four aggregate facilities and one liquid asphalt terminal supporting its operations.
The acquisition will be immediately accretive to earnings upon closing and is anticipated to generate an annualized run-rate contribution of $530 million of revenue and $120 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in fiscal 2025.
"We are excited to announce this transformational acquisition to add an outstanding platform company as we enter our seventh state," CPI President and CEO Fred J. Jule Smith III said. "Lone Star is a market leader across multiple high-growth metropolitan areas in central Texas, with a deeply experienced and effective management team and a culture of operational excellence. Through its vertical integration strategy, Lone Star reduces volatility, captures value to enhance margins and maintains its operational and scheduling flexibility.
"Lone Star's talented team has created a well-established and respected brand in Texas under the leadership of its founder and Chief Executive Officer Jack Wheeler, an industry veteran with more than 40 years of experience in the asphalt business. We believe Lone Star is well-positioned to continue growing in central Texas and beyond, currently serving three of the fastest growing metropolitan areas in the country while achieving impressive profitability."
CPI said the acquisition is consistent with its long-term growth strategy of entering new states by acquiring a company with a strong and experienced local management team, a well-established reputation for quality and opportunities for organic and acquisitive growth.
Lone Star primarily serves the Austin, San Antonio and Temple-Killeen metropolitan areas. Through this acquisition, CPI will add three of the country's fastest-growing markets to its geographic footprint.
CPI said Lone Star is a leader in its local markets, providing asphalt and related transportation construction services to public and commercial customers across central Texas.
The state of Texas has more than 700,000 lane mi. that are supported by the largest state transportation funding program in the United States, comprising stable and diversified state funding sources and the highest allocation of any state from the Infrastructure Investment and Jobs Act (IIJA).
Jack Wheeler, the founder and CEO of Lone Star, said, "We look forward to joining the CPI team and expanding the Texas platform. CPI and Lone Star share a strong cultural alignment, and we are eager for the growth opportunities available to both companies."
Under the agreement terms, CPI will acquire all of the outstanding membership units of Lone Star for $654 million in cash and 3 million shares of CPI's Class A common stock. In addition, CPI will pay cash to the sellers of Lone Star in an amount equal to the working capital remaining in Lone Star at the closing (subject to certain adjustments) in four quarterly installments.
CPI expects to finance the cash portion of the purchase price with the proceeds of debt financing. The transaction is expected to close in the first quarter of CPI's fiscal 2025 (the fourth quarter of calendar 2024), subject to regulatory approvals and other customary closing conditions.
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