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Knife River to Expand Footprint With $454M Strata Acquisition
KNFKnife River pany(KNF) ZACKS·2024-12-23 15:21

Acquisition Details - Knife River Corporation (KNF) has entered a definitive agreement to acquire Strata Corporation for 454million,basedonStrata′sestimated2025adjustedEBITDA,indicatingahighsingle−digitmultiple[1]−Thetransactionisexpectedtocloseinthefirsthalfof2025,subjecttoregulatoryapprovalsandstandardclosingconditions,withfundingfromcashonhandandlong−termdebtissuance[2]−SharesofKNFgained5.7454 million, based on Strata's estimated 2025 adjusted EBITDA, indicating a high single-digit multiple [1] - The transaction is expected to close in the first half of 2025, subject to regulatory approvals and standard closing conditions, with funding from cash on hand and long-term debt issuance [2] - Shares of KNF gained 5.7% during Friday's trading session and 2.6% in after-hour trading following the announcement [3] Strategic Benefits of the Acquisition - Strata, founded in 1910, is a vertically integrated company with over 75 aggregates locations, 28 ready-mix plants, three asphalt plants, and a contracting division, enhancing KNF's market reach and service territory [4][5] - The acquisition aligns with KNF's Competitive EDGE strategy, expected to strengthen its Central Segment growth and improve adjusted EBITDA margin within the first year [6] - Strata's high-quality assets and regional presence will reinforce KNF's long-term growth prospects in a familiar market [6] KNF's Recent Performance and Strategy - KNF's shares have gained 18.8% in the past three months, outperforming the Zacks Building Products - Miscellaneous industry's 7.3% decline [8] - The company has benefited from strong performance across its geographic segments, supported by public funding and the execution of its Competitive EDGE strategy, leading to higher product prices and improved bid margins [8] - KNF has allocated nearly 130 million across six acquisitions this year, expected to drive revenue and EBITDA growth in 2025 [9] - The Zacks Consensus Estimate for KNF's 2025 sales and EPS indicates a 6% and 19% increase, respectively, from the previous year [9] Industry Comparison - Sterling Infrastructure, Inc (STRL) has a Zacks Rank 1, with a trailing four-quarter earnings surprise of 21.5% and a 50.8% stock gain in the past six months, with 2025 sales and EPS expected to increase by 7.3% and 8.1%, respectively [12] - MasTec, Inc (MTZ) also holds a Zacks Rank 1, with a trailing four-quarter earnings surprise of 40.2% and a 26.2% stock gain in the past six months, with 2025 sales and EPS expected to increase by 8.8% and 43.4%, respectively [12][13] - Comfort Systems USA, Inc (FIX) has a Zacks Rank 2, with a trailing four-quarter earnings surprise of 14.7% and a 37.8% stock gain in the past six months, with 2025 sales and EPS expected to increase by 7.9% and 20.8%, respectively [13]