Wood Products Leader Diversifies into SteelInfrastructure
Stella-Jones Inc. (TSX: SJ), primarily known for itspressure-treated wood products, has made a decisive move to broaden itsinfrastructure portfolio by acquiring Locweld Inc., a respected manufacturer ofsteel transmission structures. The $58 million acquisition, announced on May 7,2025, represents a significant strategic pivot for the Montreal-based companyas it expands beyond its traditional wood-based utility pole business intocomplementary steel infrastructure products. The deal includes provisions foran additional performance-based consideration of up to $7 million contingent onmeeting specific financial and operational targets. This strategic acquisitionallows Stella-Jones to establish an immediate foothold in the approximately $5billion steel transmission structure market, leveraging synergies with itsexisting utility pole business while diversifying its product offerings. Thecompany has also committed to investing an additional $15 million in capitalexpenditures to increase Locweld's production capacity and optimize operationalefficiencies, signaling its long-term commitment to growing this new businesssegment.
Locweld Brings 75 Years of ManufacturingExcellence
Founded more than seven decades ago, Locweld has built asterling reputation in the specialized field of transmission towermanufacturing. Operating from a substantial 220,000 square foot facility inCandiac, Quebec, the company employs approximately 220 people and servescustomers throughout North America. With annual sales reaching approximately$55 million for its fiscal year ended September 30, 2024, Locweld bringssignificant manufacturing capacity and technical expertise to Stella-Jones'expanding infrastructure business. The acquisition includes Locweld's designand manufacturing capabilities for both lattice transmission towers and steelpoles, essential components in electrical transmission infrastructure. Underthe leadership of the Cyr family for nearly four decades, Locweld has developedspecialized knowledge in engineering and fabricating these criticalinfrastructure components, positioning it as a trusted supplier to majorutilities and energy transmission companies across the continent. This institutionalknowledge and manufacturing capability will now be integrated intoStella-Jones' broader infrastructure offerings.
Strategic Expansion Complements Core Business
For Stella-Jones, the acquisition represents a naturalextension of its existing utility infrastructure business. The company has longbeen a leading North American manufacturer of pressure-treated wood products,including railway ties and utility poles, with the latter representing asignificant portion of its business. By adding steel transmission structures toits portfolio, Stella-Jones can now offer a more comprehensive suite ofsolutions to utility companies and infrastructure developers. Eric Vachon,President and Chief Executive Officer of Stella-Jones, emphasized the strategicimportance of the acquisition, stating, "This acquisition is a step-changethat enables Stella-Jones to establish a presence in the approximatelyfive-billion-dollar steel transmission structure market, complementing ourcurrent utility poles business and offering new growth opportunities." Themove allows Stella-Jones to leverage its extensive sales and distributionnetwork while expanding its product offerings to existing customers,potentially capturing a larger share of infrastructure spending from utilitycompanies that previously sourced wood and steel products from differentsuppliers.
Market Opportunities Drive DiversificationStrategy
The timing of Stella-Jones' expansion into steeltransmission structures aligns with significant market opportunities in NorthAmerica's aging electrical infrastructure. With increasing investments in gridmodernization, renewable energy integration, and overall electricaltransmission capacity expansion, demand for both wood utility poles and steeltransmission structures is projected to grow substantially in coming years. Theacquisition positions Stella-Jones to capitalize on these market trends by offeringa more diverse range of infrastructure solutions. Industry analysts note thatthe North American electrical grid requires substantial upgrades and expansionto accommodate renewable energy sources and meet growing electricity demands,creating sustained demand for transmission infrastructure components. Bydiversifying into steel structures while maintaining its strong position inwood utility poles, Stella-Jones has positioned itself to benefit frominfrastructure spending regardless of material selection preferences fromutilities and developers. This material-agnostic approach could providecompetitive advantages as the company can now offer optimized solutions basedon specific project requirements rather than being limited to wood-basedoptions.
Leadership Transition and OperationalIntegration
As part of the acquisition, Locweld's Chief ExecutiveOfficer Michael Cyr will be stepping down from his role, though key members ofthe management team will remain with the organization to ensure continuity andsupport the integration process. This approach aims to preserve Locweld'sspecialized knowledge and customer relationships while allowing for operationalsynergies under Stella-Jones' ownership. Cyr expressed optimism about thetransaction, stating, "This transaction will be mutually beneficial; Locweldwill benefit from the breadth and strength of a larger organization that viewsthe transmission structure industry as a keystone of its future growth, and ourteam will bring industry expertise and know-how to continue to deliverexceptional value to customers." The retention of key management personnelsuggests Stella-Jones recognizes the value of Locweld's institutional knowledgeand customer relationships, while providing the financial resources andcorporate infrastructure to accelerate growth. Stella-Jones has indicated itwill operate Locweld as a complementary business to its existing utility poledivision, potentially creating opportunities for cross-selling and integratedcustomer solutions.
Financial Implications and Funding Structure
Stella-Jones will finance the $58 million base acquisitionprice through its existing revolving credit facilities, indicating thecompany's strong financial position and access to capital. The transactionstructure includes customary working capital adjustments and the potential forperformance-based additional payments of up to $7 million, aligning incentivesfor operational success post-acquisition. With Locweld generating approximately$55 million in annual sales, the acquisition is priced at just over one timesrevenue before considering the additional performance-based consideration. Thisrelatively modest valuation multiple suggests Stella-Jones sees significantopportunities to improve profitability and drive growth through operationalimprovements and market expansion. The company's commitment to invest anadditional $15 million in capital expenditures to increase production capacityfurther demonstrates confidence in the growth potential of the steeltransmission structure business. Stella-Jones has indicated it does not expectto make any further announcements regarding the transaction, suggesting theintegration is expected to proceed smoothly without material complications.
Infrastructure Market Consolidation Continues
This acquisition represents part of a broader trend ofconsolidation within the infrastructure products industry, as companies seek tooffer more comprehensive solutions to utility and construction customers. Byexpanding into steel transmission structures, Stella-Jones follows a patternseen across the infrastructure sector where specialized manufacturers are beingintegrated into larger organizations capable of providing a wider range ofproducts and services. The move may prompt similar strategic acquisitions bycompetitors seeking to maintain competitive positioning in the evolvinginfrastructure products landscape. Industry observers note that infrastructurecustomers increasingly prefer suppliers capable of providing multiple productcategories, simplifying procurement and project management while potentiallyreducing costs. Stella-Jones' expansion beyond its traditional wood productsbusiness reflects this market reality and positions the company to compete moreeffectively against diversified infrastructure suppliers. The acquisition mayalso provide Stella-Jones with additional insulation against marketfluctuations in specific material categories, as demand patterns for wood andsteel infrastructure components can vary based on project requirements,material costs, and environmental considerations.
Future Growth Trajectory Takes Shape
With this acquisition, Stella-Jones has clearly signaledits strategic direction toward becoming a more diversified infrastructureproducts provider. The move into steel transmission structures represents asignificant expansion of the company's addressable market and creates newavenues for organic growth and potential further acquisitions in adjacentproduct categories. By leveraging its existing customer relationships anddistribution capabilities while adding new product lines, Stella-Jones appears positionedto capture a larger share of utility infrastructure spending. Eric Vachonemphasized this strategic vision, stating, "We are executing on ourstrategy to broaden Stella-Jones' infrastructure offering with an acquisitionthat capitalizes on our expansive sales and distribution network. With thisstrategic move, we are well positioned to better serve our customers and gaininvaluable experience as we work to continually develop our reach." Theacquisition may serve as a template for future expansion into otherinfrastructure product categories as Stella-Jones continues to evolve from itsroots as a pressure-treated wood specialist into a more comprehensiveinfrastructure solutions provider capable of serving diverse customerrequirements across multiple material types and applications.
Key Takeaways:
• Stella-Jones Inc. has acquired Locweld Inc., aQuebec-based manufacturer of lattice transmission towers and steel poles, for$58 million plus potential performance bonuses of up to $7 million, enablingthe company to enter the $5 billion steel transmission structure market whilecomplementing its existing wood utility pole business.
• Locweld brings 75 years of manufacturing expertise, 220employees, and annual sales of approximately $55 million from its 220,000square foot facility in Candiac, Quebec, serving customers across North Americawith critical electrical transmission infrastructure components.
• Stella-Jones plans to invest an additional $15 million incapital expenditures to increase Locweld's production capacity and operationalefficiency, while retaining key management personnel to ensure continuity andfacilitate integration with its existing utility infrastructure business.
