CRH paying '€700m over the odds for European acquisition'
Published 11/04/2015 | 02:30
CRH is paying €700m over the odds for a €6.5bn acquisition which would make it the world's third-biggest building materials supplier, according to an investor report.
The claim comes from US-based AllianceBernstein (AB), a global asset management firm which has approximately $474bn in assets under management that also which also provides research services to high-net-worth and institutional investors.
CRH, Ireland's biggest company, has agreed to buy a number of mostly European assets from Lafarge and Holcim for €6.5bn so the French and Swiss firms can get competition clearance for their plan to create the cement industry's biggest company.
The deal had looked like it might fall apart after the Swiss side sought to renegotiate the terms and remove the current chief executive of Lafarge, Bruno Lafont, from the helm of the combined entity.
The asset sale to CRH, which is conditional on the merger going ahead, looked to be a step closer as the two companies announced the appointment of Lafarge insider Eric Olsen as chief executive of their combined company during the week.
However, AB has now raised doubts about the value of the deal for CRH, which until now had been viewed broadly as a positive move for the Dublin-based firm.
The move was also was overwhelmingly approved by shareholders at a recent extraordinary general meeting.
In a detailed report into the deal, AB said that the move represents a "step in the wrong direction for CRH".
It said: "The acquisition price of €6.5bn is 12pc above our €5.8bn estimate of the fair value of the assets."
US private equity firm Blackstone was reported to have been CRH's main competition for the assets, and was said to have tabled a €5.5bn bid.
Phil Roseberg, a senior analyst at AllianceBernstein and one of the authors of the report, said that he thought that CRH had paid "at or just above" a fair value for the assets.
Speaking to the Irish Independent, he said: "I think that CRH paid above where the private equity guys were willing to pay, because they could avoid the cost of setting up a corporate office and probably because they wanted the assets more."
The report also said that it was worried that CRH's core growth model is "broken".
It said: "CRH's model of bolt-on acquisitions, which drove average 10pc top-line growth and largely superior returns compared to peers, was the 'essence' of CRH's appeal during much of the last two decades.
"The acquisition of LafargeHolcim's portfolio of assets compounds our fears that the company is changing its focus and, in our view, is a step in the wrong direction for CRH."
When contacted by the Irish Independent, a spokeswoman for CRH referred to a statement that the firm previously issued announcing the €6.5bn deal.
In the announcement, CRH chief executive Albert Manifold, below, said: "We are acquiring a quality portfolio of assets, which compliments our existing positions, at an attractive market rate."