Arcosa Inc., a Dallas-based provider of infrastructure-related products and solutions, recently announced that it reached a definitive agreement to acquire Houston-based Cherry Industries Inc. and affiliated entities for $298 million. Established in 1952, Cherry is one of the nation’s largest producers of natural and recycled aggregates.
Reid Essl, president of Arcosa Construction Products, a division of Arcosa Inc., spoke with Construction & Demolition Recycling (C&DR) about what the acquisition means for the company.
C&DR: Can you give any background on the acquisition and what attracted you to Cherry Industries?
Essl: The team at [Norman, Oklahoma-based] ACG Materials, who we became familiar with after we acquired the company in December 2018, introduced us to the Cherry leadership team, and we quickly realized the strategic fit of the business with Arcosa’s platform. The Cherry acquisition expands our aggregates business into the attractive Houston market, builds a leadership position in the growing recycled aggregates market and provides a platform for Arcosa to replicate Cherry’s natural and recycled aggregates offering in new geographies. We are confident in the long-term fundamentals of infrastructure spending in Texas, driven by population growth, strong fiscal health and major highway investments throughout the state.
C&DR: What made them a compatible partner?
Essl: Cherry’s team has a strong cultural fit with our team, as we share the same core values of safety, customer focus and entrepreneurialism. We have been very impressed with the team as we have spent time with them over the past year. Ivan Svec, the current president of Cherry, will continue to run the day-to-day business and will report directly to me. Leonard Cherry, the majority owner, will still be involved in the business and will transition to a role working primarily on reserve acquisitions. The rest of the leadership team will stay the same.
C&DR: What kind of assets will be added to Arcosa’s portfolio under this deal?
Essl: Cherry operates 12 Houston-area locations—a combination of natural aggregates plants and recycled aggregates facilities—and they have additional reserve positions in the area. Their network of strategically located facilities and reserve positions is a unique competitive advantage of their platform, allowing them to efficiently supply customers across the Houston area.
C&DR: How will this acquisition enhance your offerings?
Essl: Cherry has a fantastic set of long-term customer relationships that they have built over decades, and they sell many of them natural aggregates, recycled aggregates and provide demolition services. We think there is an opportunity to expand this product offering to new geographies, as well as to grow the natural aggregates part of their business in Houston using our team’s deep expertise in sand and gravel.
C&DR: How do you envision that your company will evolve in the coming years?
Essl: At the time of the acquisition announcement, we noted that the acquisition gave us an immediate leadership position in recycled aggregates. We believe recycled aggregates are positioned to continue growing as a category due to resource scarcity and [environmental, social and governance] ESG benefits, and we are seeing increased product acceptance of recycled aggregates by DOTs across the country. We look forward to working with the Cherry team to find additional ways to grow our recycled aggregates platform through acquisitions or organic growth.