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Hanson Building Materials America Inc. is the third largest aggregates producer in the United States. Hanson Building's aggregates products--construction materials--include sand, gravel, limestone, asphalt, and ready-mixed concrete. The company also ranks as the largest producer of concrete pipes and precast concrete products in the United States and as the second largest brick manufacturer in the country.
Hanson Building's contributions were instrumental to the success of its parent company, Hanson plc, during the 1990s. Operating as the U.S.-based subsidiary of its English parent, Hanson Building delivered the greatest financial growth to Hanson plc, whose origins were the origins of Hanson Building.
Hanson plc's corporate roots stretched back to 1964, when James Hanson and Gordon White created Hanson Trust, the predecessor to Hanson plc. Hanson rose to the forefront of the U.K. corporate world during the 1970s and 1980s, when Hanson and White transformed their enterprise into a sprawling conglomerate. During the two-decade span, Hanson and White, both conferred as Lords, invested in an eclectic array of businesses that established their enterprise as multi-national concern. They held interests in chemical factories in the United States, electrical companies in the United Kingdom, and gold mines in Australia. Hanson was involved in making cigarettes, Jacuzzis, toys, and cranes and held interests in the production of cod liver oil capsules, batteries, and golf clubs. Physically and operationally, the conglomerate was spread far afield, its variegated businesses forming an all-encompassing corporate umbrella that was difficult to define as a single entity. To a certain extent, Hanson was all things and operated everywhere.
The need to lend some definition to company arose during the mid-1990s. The need, as perceived in the minds of Hanson executives, stemmed from changes in the minds of investors. Investors' interest in conglomerates was fading, giving way to a preference for investing in companies involved in single business sectors. In response, Hanson officials, still led by Lord Hanson, decided in January 1996 to break the company up into identifiable pieces, leading to the process of de-merging the conglomerate into four separate, publicly traded concerns. The conglomerate began to unravel itself, resulting in the formation of Imperial Tobacco, The Energy Group, and Millennium, the inheritor of Hanson's U.S.-based chemical assets. The remaining interests, comprising heavy building materials businesses, were held by Hanson plc. In the future, the Hanson name would apply only to businesses involved in the worldwide market for construction materials, which was the new, narrowed focus of the former industrial conglomerate.
The de-merger was completed in February 1997, resulting in three companies composing parent company Hanson. The three companies were ARC, Hanson Brick, and Cornerstone. The latter, which was officially named Cornerstone Construction & Materials, Inc., was soon to become Hanson Building. As a part of Hanson, Cornerstone was aptly named because its existence was integral to the health and wealth of Hanson. Cornerstone produced crushed rock, sand, and gravel for highway, residential, commercial, and industrial construction projects. The company made ready-mix concrete, hot-mix asphalt, and cement. As a whole, Cornerstone operated in the construction aggregates industry and represented Hanson in the United States, by far the greatest producer and consumer of aggregates in the world. At the time of the de-merger, the U.S. aggregates market was highly fragmented, populated by more than 5,000 companies. The three largest competitors controlled only 15 percent of the market, which meant there was plenty of opportunity for growth. In contrast, the four largest aggregates companies in the United Kingdom controlled 70 percent of the market. Accordingly, Hanson, with its newly narrowed focus on heavy building materials, attempted to seize the opportunity for expansion by diverting much of its resources to its U.S. representative. By assuming an acquisitive posture in a highly fragmented market, Hanson, through Cornerstone, and later through Hanson Building, bolstered its share of the aggregates market, vying for the number one position in the lucrative U.S. market.
Hanson Building Blossoms in the Late 1990s
During the second half of the 1990s, much of Hanson's financial success was derived from the growth of its U.S.-based operations. The acquisitions completed during this period typically were what the company referred to as "bolt-on" acquisitions: the purchase of small- and medium-sized companies involved in businesses and markets where Cornerstone already operated. Rarely did an acquisition usher the company into a new facet of the aggregates market; the company was not diversifying, it was solidifying its existing presence.
In 1997, the streamlined Hanson embarked toward its new tightened vision. Lord Hanson retired during the year, relinquishing his title as chairman to Christopher Collins in December. Cornerstone displayed its strengths from the start. There were several small bolt-on acquisitions completed during the year in California and Kentucky that increased the company's market penetration. The largest acquisition of the year, completed in April, was the purchase of Concrete Pipe and Products, which shored up the company's ranking as the second largest producer of concrete pipe in the country. By the end of the year, the company was operating in more than 20 states, with its operations in California, Georgia, North Carolina, and Texas proving to be particularly important.
During its first full year of operation after the de-merger, Hanson's U.S.-based operations drove the company toward a successful year. In 1998, Cornerstone generated £128.1 million in profits, an increase of 45 percent from the previous year's total. During the year, the subsidiary produced more than 100 million tons of crushed rock, sand, and gravel for use in highway, residential, commercial, and industrial construction projects. The company also supplied pre-cast floors, roofs, walls, and supporting structural components. By the end of the year, Cornerstone was operating in more than 250 locations in 24 states from coast to coast.
In 1998, Cornerstone was given considerable resources to deepen its presence in the United States. Roughly $300 million was spent on acquisitions during the year, money that was well spent considering the expected surge in business resulting from the passage of an important piece of legislature. Approximately half of Cornerstone's business depended on federal, state, and municipal contracts covering highway infrastructure projects. This significant portion of the company's business received a boost in 1998 when the U.S. Congress passed the Transportation Equity Act for the 21st Century, known as TEA-21. TEA-21 appropriated $215 billion for federal highway spending for a six-year period, a 44 percent increase from the previous highway spending bill. Increased spending meant more business for Cornerstone, which ranked as the second-largest producer of ready-mix concrete in the country. "TEA-21 gives us lots of confidence for the future," Cornerstone's chief executive officer, Alan Murray, remarked in an April 1999 interview with Pit & Quarry.
In early 1999, uniformity was given to the entire Hanson organization. Each Hanson plc operating division adopted the Hanson name, giving the global company a single identity and a single brand name. ARC was renamed Hanson Quarry Products Europe, Hanson Brick was renamed Hanson Bricks Europe, and Cornerstone was renamed Hanson Building Materials America. At Hanson Building, the name change was followed by a reorganization of its operations. "We unified our corporate structure to emphasize that we are a large company and a major player in the building materials industry," explained Murray, in his April 1999 interview with Pit & Quarry. "We were operating under a variety of brand names previous to that," he added. "We now operate under two regions: Eastern and Western."
Hanson Building's spending spree continued in 1999. The company and the two competitors ranking above it, Vulcan Materials and Martin Marietta, drove the consolidation of the industry, which was expected to "take another decade or two to run its course," according to Murray in the May 11, 2000 issue of the Financial Times. Hanson Building, like its rivals, focused on the thousands of mom-and-pop businesses, which often operated a single quarry. "Usually, the deals are $100 million or under," a Hanson Building spokeswoman was quoted as saying in the November 24, 2000 issue of the Dallas Business Journal. "Our products don't travel far, so you want a local presence in a metropolitan area--that's where the big buildings, stadiums, arenas, and airports are being built," she added.
In return for backing an exhaustive acquisition campaign, Hanson plc gained the workhorse of its organization. There were 12 acquisitions in North American completed in 1999, accounting for three-quarters of Hanson plc's outlay toward acquisitions for the year. The additions, eight of which were based in the United States, strengthened Hanson Building's lead in the concrete pipe and precast products market. The company also acquired two marine-dredging operations in the San Francisco area and extended its presence into Canada by spending £32.8 million on acquisitions. The largest acquisition of the year, the purchase of Jannock's North American brick operations, made Hanson Building the second-largest producer of bricks in North America. By the end of 1999, Hanson Building accounted for 56 percent of its parent company's £1.9 billion in revenue and acted as the chief contributor to its parent company's profit growth.
By the spring of 2000, $900 million had been spent on acquisitions for Hanson Building during the preceding three years. Quarry by quarry, and company by company, Hanson Building had expanded through the addition of bolt-on acquisitions. There was one deal, however, that represented far more than a bolt-on addition to the company's fold. In May 2000, Hanson plc completed the $2.5 billion acquisition of Australia-based Pioneer International Ltd. Although most of Pioneer's assets were located in Europe and Australia, the company held significant interests in the United States. Hanson Building absorbed Pioneer's U.S. operations, which bolstered the company's presence in California and Texas and provided entry into Arizona and Utah, two new markets for the company.
Hanson Building in the 21st Century
The steady bolt-on acquisition campaign continued in the wake of the Pioneer acquisition. In 2000, Hanson Building purchased eight smaller companies that increased its presence in existing markets and led it into new markets. In May 2000, the company announced the purchase of two concrete pipe and products producers for $135.9 million. Joelson Taylor, the larger of the two purchases, established Hanson Building in Florida for the first time. The other acquisition, Cincinnati Pipe, shored up the company's presence in the Midwest market. Smaller acquisitions followed the purchase of Joelson Taylor and Cincinnati Pipe, such as the acquisition of two quarries in Indiana and Texas for a total of $18.5 million, enabling the company to post rousing financial results for the year. For the eighth consecutive year, Hanson Building recorded an increase in profits. Revenues in 2000 increased as well, jumping 55 percent to $1.6 billion.
As Hanson Building entered the 21st century, the economic climate soured, causing reduced demand for heavy building materials. The downturn began in late 2001 and carried on through 2002. For the first time since 1991, volume in the U.S. aggregates industry declined, ending Hanson Building's impressive streak of financial gains. For 2002, profits fell 12.7 percent and revenues shrank 6.2 percent. Acquisitions in that year primarily benefited Hanson Building's concrete pipe and products business.
As Hanson building prepared for the future, the company's leading market positions promised to hold it in good stead when economic conditions improved. The company continued to acquire bolt-on companies while economic conditions remained uncertain. In the first half of 2003, the company purchased quarries in Ohio and Kentucky. Hanson Building also completed the acquisition of Better Materials Corporation, an aggregates producer with strategically important operations in Pennsylvania and New Jersey. Looking ahead, the company promised to be a challenger for the number one position in the U.S. aggregates industry with its commitment to expansion driving the trend toward consolidation.
Principal Subsidiaries: Hanson Aggregates East, Inc.; Hanson Pipe & Products, Inc.
Principal Competitors: Lafarge North America Inc.; Martin Marietta Materials, Inc.; Vulcan Materials Company.