Continued Rapid Consolidation Predicted for Aggregates Industry by New U.S. Bancorp Piper Jaffray Report.

Business Editors &Analysts

MINNEAPOLIS--(BUSINESS WIRE)--Feb. 1, 2000

Driven by strong demand, increased highway spending, and environmental restrictions that make the development of greenfield plants prohibitively expensive, the U.S. aggregates industry will continue to experience significant consolidation, according to a report released today by U.S. Bancorp Piper Jaffray's Mergers and Acquisitions Group. Aggregates are defined as crushed stone and construction sand and gravel.

The report notes that more than 150 aggregate acquisitions have been announced over the last four years. Including smaller, private market transactions, acquisitions are occurring at the rate of one per week, according to the report's author, Thomas M. Carroll, an investment banker with U.S. Bancorp Piper Jaffray in Chicago. The report concludes that there are five primary factors underlying this consolidation: strong construction and infrastructure development markets, the commodity nature of the business, the ability of larger companies to increase aggregate production efficiency, the changing aggregate requirements of so-called Superpave materials, and environmental restrictions that can make creating new sites expensive and time consuming.

Carroll expects industry consolidation to continue at a very rapid pace. He notes that the U.S. aggregates industry is highly fragmented with more than 5,000 companies, yet there are significant economies to be gained from building a regionally dominant position. The top five aggregate firms currently produce less than 25 percent of the total U.S. output. The U.S. Bancorp Piper Jaffray report lists California, Texas, New York, Florida, and Illinois as the five more attractive states for aggregate acquisitions. This analysis is based on the three key drivers to aggregate demand - total population base, population growth, and federally mandated highway spending. Highway spending as provided for in the Transportation Equity Act for the 21st Century (TEA-21), is highly correlated with overall aggregates spending.

&uot;This is an industry that is benefiting from rational consolidation,&uot; said Carroll. &uot;Larger companies can achieve higher operating efficiencies in a number of ways, including spreading the cost of technology spending over more production and eliminating redundant operations.&uot;

Carroll notes that M& activity in the sector has been dominated by strategic rather than financial players, with a large companies acting as major consolidators. Martin Marietta Materials has been the leading acquirer, with 27 acquisitions over the last 48 months. Vulcan Materials is the second most active, with 16 acquisitions over the same time period. Foreign firms have been active acquirers as well, according to the report, with 16 M& transactions announced by non-U.S. companies in 1999 alone. Though less active, there are financial buyers in the market as well, creating competition which helps drive up prices for sellers, says Carroll.

The U.S. Bancorp Piper Jaffray report identifies 13 private firms that are potential acquisition candidates, based on a number of characteristics the firm believes are attractive to buyers. These include substantial high grade reserves, an efficient production process, talented operating management, and a well-established transportation system. Carroll notes that the aggregates business is very much regional in nature. &uot;Transportation costs overtake extraction costs when materials are transported outside a small radius,&uot; he states in the report.

&uot;Mining Higher Aggregate Company Values,&uot; is available to the media and clients of U.S. Bancorp Piper Jaffray. For more information on receiving reports, call the Report Hotline at 612 342-8850.

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