SigmaRoc PLC (LON:SRC), the quarrying and building materials group, has said it will acquire the remaining 60% it does not already own of South Wales-based GDH.
The consideration is £7.5mln, to be funded by cash, with completion expected on or around September.
SigmaRoc noted that it expects the acquisition to be significantly earnings enhancing.
GDH operates 17 production facilities producing asphalt, concrete and including a wharf operation, as well as four road contracting units.
Ian Harries, the son of founder Gerald Harries, will continue to have an active involvement in the company going forward, SigmaRoc said.
An independent assessment of GDH’s mineral has indicated close to 80m tonnes of reserves and resources or 100 years at the present rate of consumption.
GDH has recorded a solid performance in each month of this year, SigmaRoc added, with a positive underlying profit [EBITDA] for the months of the coronavirus lockdown in Wales.
In a statement, Max Vermorken, SigmaRoc’s chief executive commented: "Over the past 18 months we have assisted GDH with its development as a minority shareholder. As we are moving into a new phase of the development of the business we look forward to continuing to work with Ian Harries and his team to build and strengthen GDH."
Sigmaroc paid £4.9mln for its original 40% stake in GDH in April 2019.
Value highlighted
SigmaRoc's exercise of its option to buy the remaining 60% of GDH has underlined how undervalued it is, according to Liberum.
The broker suggests that on the assumption GDH’s expensive debt can be refinanced onto group terms, the acquisition could enhance 2021E earnings by at least 9%.
The broker has a price target of 60p or 30% above the current market level.
Peel Hunt points out that the shares have bounced smartly in the last three months and the increase of 19% makes them one of the best performers in the building materials space.
Shares rose 5% to 46p.
-- adds comment, share price --