Kingspan acquires CRH insulation unit for €120m
Cavan-based building materials firm Kingspan has agreed to pay €120m to acquire the European insulation manufacturing business of CRH in a move that will boost the company's annual revenue by about a fifth and on its own account for a sizeable chunk of its operating profit.
Kingspan, which had sales last year of €1.12bn and is forecast to generate revenue in the current financial year of €1.16bn, will initially pay CRH €120m upon closure of the deal in the first quarter of 2011, with up to a further €6m payable depending on future earn-out conditions being met. Kingspan will acquire the CRH Insulation Europe (CIE) business on a cash-free and debt-free basis.
The CRH business, which includes six business units in seven countries, had been put up for sale months ago after the company decided it wanted to exit non-core divisions. It is also selling its climate control business and it had been expected that the sale of both it and the insulation arm could have generated a sale figure of between €300m and €400m.
Analyst Flor O'Donoghue of Davy Stockbrokers told the Irish Independent that he thought the deal was a "good fit" for Kingspan, but that it would have a "good bit of work to do" with the acquired business over the next year.
In the 12 months to the end of last December, CIE generated revenue of €240.5m and earnings before interest, tax, depreciation and amortisation (EBITDA) of €19.8m, excluding exceptional charges. Operating profit for the year was €10.6m. EBITDA in the current year is likely to be €11m. Mr O'Donoghue said that based on the 2009 EBITDA figure, the purchase price "looks OK", but seems expensive based on the 2010 forecast.
Kingspan said it expects the acquisition to be earnings neutral in 2011 after restructuring costs and earnings-enhancing thereafter. It's also likely to dispose of some of the acquired units following a review next year.
Kingspan chief executive Gene Murtagh described the acquisition as an "excellent opportunity" for the company to assume a leading position in northern Europe. He added the acquisition will provide a platform to "drive growth and conversion to our products across Europe for many years to come". CRH chief executive Myles Lee said the CIE business was an excellent strategic fit for Kingspan.