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Commercial Metals (CMC) Inks Deal to Acquire Tensar for $550M

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Commercial Metals Company CMC entered into an agreement to acquire TAC Acquisition Corp. (Tensar) for $550 million. The purchase price represents a multiple of 8.4x Tensar's expected EBITDA in the current year, inclusive of cost synergies of approximately $5 million.

The latest deal will reinforce Commercial Metals’ leading position as a global provider of construction reinforcement solutions, with value-added products offerings. Through this buyout, Commercial Metals will accelerate growth in complementary high-margin engineered products for its largest targeted core market, construction, serving end-use markets and customer segments.

Tensar is a leading provider of engineered solutions for subgrade reinforcement and soil stabilization used for infrastructure, road and commercial construction projects. Tensar’s geogrid technology reduces total consumption, thus decreasing construction time, expenses and maintenance costs.

Tensar is a strategic fit for Commercial Metals as the companies are focused on delivering value-added solutions in early-stage construction to customers while bringing substantial value through innovations. Apart from these, both the companies are committed to maintaining a sustainable environment. Tensar's subgrade reinforcement and soil stabilization products lower carbon emissions by up to 30% from construction projects compared with conventional procedures.

Commercial Metals is gaining from stellar demand for steel products across most end markets, driven by elevated spending on the residential and construction sector in North America and recovery in the manufacturing sector. Solid construction growth is driving new residential construction work, spurring demand for rebar. Strong construction backlog in North America as well as strength across the key end markets in North America and Europe will continue supporting the solid steel sales volumes in fiscal 2022.

Commercial Metals is progressing well with the construction of a third micro mill in Arizona 2, which will be the world's first mill to produce merchant bar quality (MBQ) steel products. The company ramped up its third new rolling line in Europe, aiding the strong demand for merchant and wire rod products in the Central European industrial market.

Commercial Metals continue to gain from its ongoing network optimization efforts, which will generate additional margin and reduce costs in the near future. It is implementing a rise hike across its mill products in response to the rapidly-rising scrap costs.

Share Price Performance

Commercial Metals’ shares have gained 61.4% in the past year compared with the industry’s growth of 40.2%.

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Zacks Rank & Other Stocks to Consider

Commercial Metals currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the basic materials space are Olin Corporation OLN, Bunge Limited BG and Nucor Corporation NUE. While Olin and Bunge flaunt a Zacks Rank #1, Nucor carries a Zacks Rank #2.

Olin’s third-quarter 2021 adjusted earnings beat the Zacks Consensus Estimate, while revenues missed the same. It has an expected earnings growth rate of around 740% for the current fiscal year. The Zacks Consensus Estimate for current-year earnings has been revised 20.5% upward in the past 60 days.

Olin’s shares have surged 229% in the past year. The company has a long-term earnings growth of 56%.

Bunge’s third-quarter 2021 earnings and sales beat the respective Zacks Consensus Estimate. It has a trailing four-quarter earnings surprise of 105.7%, on average. The company has an estimated earnings growth rate of around 45% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 36%.

Bunge’s shares have appreciated 60% in the past year. It has a long-term earnings growth of 6.7%.

Nucor’s third-quarter adjusted earnings missed the Zacks Consensus Estimate, while sales beat the same. NUE has a trailing four-quarter earnings surprise of 2.74%, on average.

Nucor has a projected earnings growth rate of around 583% for 2021. The Zacks Consensus Estimate for current-year earnings has been revised upward by 18.1% in the past 60 days. The company’s shares have soared 128% in a year.


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