Summit Materials Inc (NYSE: SUM) stock surged 14.01% on June 13^th, 2019 (Source: Google finance) after the news breaks that the company is in talks surrounding a potential merger. The stock lost over 3.4% on June 14^th, 2019 (as of  12:44 pm GMT-4 ; Source: Google finance)

According to various reports, a Columbian industrial conglomerate by the name of Grupo Argos has approached the company about a potential merger. Grupo Argos is a Colombian industrial conglomerate spanning energy and building materials. The deal is expected to boost Grupo Argos’ U.S. footprint and illustrate how building materials companies in emerging markets are seeking to become consolidators of their sectors in more mature economies.

Grupo Argos sees value in combining Cementos Argos SA, which is one of its subsidiaries, with Summit Materials and gaining scale. However, there is no certainty that Summit Materials will negotiate a deal with Grupo Argos. If the deal were to take place, it would be a strong move for both sides. First and foremost, SUM stock holders would likely enjoy a strong premium in a value-add transaction. On the other side of the coin, Grupo Argos would benefit from a strong footprint in the United States and a move to consolidate its sector in a more stable economy, building its overall strength. Considering recent gains in SUM stock, the company is valued at about $1.8 billion. With strong growth in the sector expected ahead, there’s a good chance that the premium offered in a merger would be at least 10% or greater. All in all, if a deal was going to be made, now is a great time to ensure that it comes with strong investor value.

Meanwhile, SUM’s debt pile stood at $1.9 billion as of the end of March. Its shares had underperformed peers Martin Marietta Materials Inc and Vulcan Materials Co so far this year, as the cement sector becomes increasingly competitive. Last month LafargeHolcim, the world’s largest cement maker, said it expected demand to continue rising this year. Summit Materials makes aggregates which it supplies across the United States and in British Columbia, Canada, as well as cement, which it supplies to surrounding states along the Mississippi River, from Minnesota to Louisiana. Cementos Argos is the fourth largest cement producer in the southeast of the United States, with four plants, according to its websites. It is the second largest aggregates producer in the United States. Grupo Argos owns 58 percent of Cementos Argos. In turn, Grupo Argos is 35.4 percent-owned by investment holding company GrupoSURA.