Brickmaker Forterra plans £450m IPO

Employees sort through piles of newly manufactured house building bricks at Hanson Brickworks, owned by HeidelbergCement AG, in Measham, U.K., on Thursday, Nov. 28, 2013. U.K. house prices rose in November to the highest level in more than five years as a combination of low mortgage rates and easier access to credit boosted demand, Nationwide Building Society said. Photographer: Chris Ratcliffe/Bloomberg©Bloomberg

Britain’s second-biggest brickmaker is planning a £450m float on the London stock market as it seeks to capitalise on the housebuilding boom.

Forterra, formerly the UK building products division of Hanson, controls 29 per cent of the British market and is seeking to increase its brickmaking facilities.


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The company is owned by Lone Star, the US private equity business, which acquired it last March from HeidelbergCement in a £990m deal.

It follows last year’s flotation of Ibstock, the UK’s largest brickmaker, which was listed by Bain Capital, another private equity firm, just nine months after it bought the group.

Forterra employs 1,600 staff and owns 17 factories and 12 clay quarries in the UK. It is the sole producer of Fletton bricks, which are used to build about a quarter of all British houses and sold under the London Brick brand.

Stephen Harrison, Forterra chief executive, said: “The fundamentals of our industry are attractive and with our efficient manufacturing base, strong positions across all product categories, longstanding customer relationships, and significant scope for future capacity expansion, Forterra is very well placed for the future.”

Lone Star is planning to sell roughly 25 per cent of its holding to institutional investors in the UK and abroad. This would give the company an enterprise value of about £600m including debt, or £450m with debt stripped out, based on rival Ibstock’s current market valuation.

New residential homes and home improvements accounted for about 95 per cent of revenue last year. The rest came from the commercial construction market.

Last year revenue at Forterra rose 8 per cent to £290m; while earnings before interest, taxes, depreciation and amortisation increased 29 per cent to £71m.

Brickmakers in Britain have been ramping up capacity since 2013 after closing plants, slashing their workforces and leaving factories idle in the winter months when the housing market collapsed in the wake of the financial crisis in 2007.

Forterra cut domestic production by a fifth to about 2bn bricks between 2008 and 2013 but has since reinstated previously mothballed plants amounting to about 50m bricks a year.

It is planning to expand capacity at its Claughton, Accrington and Desford facilities. It also has permission to develop a manufacturing facility at Clockhouse in Surrey, but is unlikely to make a final decision until 2020.

Even despite an increase in housebuilding, supported by government incentives, the number of housing starts are still 28 per cent below that in the first quarter of 2007.

Construction activity overall is 4.1 per cent below its pre-recession peak but Forterra said that the growing UK population combined with a structural undersupply would “underpin future demand for new housing and, therefore, building products”.

Credit Suisse, Deutsche Bank and Citigroup are managing the share sale.

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