RE:RE:Fundamentals: run your business wellSo you'd be surprised - this is a bit of a poker match.
For one - even if Heidelberg need aggregate - let's keep in mind they are a cement company first and foremost and they earn teir profit from selling cement. So if they know what is comming - they may be better served to spend $100M on an expansion of their cement capacity that serves the market - knowing that they could earn $100/ton of enit on $160/ton cement. That would be their strategic decision of where they allocate capital.
If they run downstream ready mix - then they may want the aggregate. But do they need to own it? Maybe they say to Highbank - I want 500,000 tons a year - lets sign a 5 or 10 year supply contract and lets do it at $40/ton with escalators. That way they get what they want pay some sort of premium per ton - but dont need to own the asset and the logistic challenge.
Let me repeat: marina and river aggregates is no easy busy - there is risk: demurage risk, permit risk, tidal, storm risk, frozen pond risk, tug boat driver strikes, and so on. HBK have permit, aboriginal risk too (granted thats been well managed to date) - but its a risk.
Big old Hieldelberg Hanson - headquarted in Germany and probably some big regional north american office in Vancouver and/or Washington - graced by managers with just about the right amount of starch in their white shirts - dont like risk. They are managed on returns and cash flow on predictable cement kilns and less on risky marine aggregate businesses. It would rare in Big Cement - to find this sort of latitude given to a local manager - in short, I dont think it would happen.
Now I look at Summit Materials - whic is a conferacy of businesses in the US and now Canada - and they do agg, and contracting, do some paving, have 1 cement kiln in MO, do some RMX in Texas - and now that they do Marine agg in Vancouver - they could plausible like the KBK opportunity - cause the management team in Vancouver know this business well - know the tides, know the authorities, have the pedigree and capability - and they would have the balls (and managers in checked shirsts) to take on this marine agg HBK risk.
Back to poker. There is risk and great reward on the demand side. No one, no one like to pay for an unproven opportunity (thats how men lose their job). But they do like to pay for businesses that at least have a 3-5 year track record - they can sell that to their board. You can not sell a "no-runs-on-the-board" opportunity to any board that has a fiduciary duty to shareholders. Again: ain't going to happen.
So the bluster of "everyone knows whats going on next year" - well, that someone holds 3 Aces - argh... that's cards and it is not business. HBK needs runs on the boards - then it has a seat at the table and a strong hand to play with. It does not at the moment. It needs to build its book of business - get a couple of picture cards - maybe a flush - and then it has some much needed gravitas.
Maybe everyone will look at HBK and say - I want the product but i dont want the head ache to own it. So I'll buy the agg at top dollar - as a way of keeping risk at arms length.
BTW - I have not done the work - but I need to understand what the competing sources of agg are against HBK. Can someone else enter this market somehow? I need to u/stand that better.