Wednesday 20 September 2017

Tribunal orders CRH to sell share of cement firm

Analyst says price of sale cushions the blow and investors agree as stock rises by 2.6pc

John Mulligan

John Mulligan

CRH has been told by a Paris-based international arbitration tribunal that it must sell its 49pc stake in a Portuguese cement manufacturer to its partner in the business for €574m.

The ruling comes after a long-running legal dispute between CRH and Portugal's Semapa over their holdings in Secil.

CRH paid €429m to Semapa in 2004 for the stake in Secil, which included the assumption of €100m in net debt.

In 2009, CRH rejected claims by Semapa, which owns 51pc of Secil, that it was entitled to exercise a call option, which would enable it to buy back the Irish company's stake.

The matter was then referred to the International Chamber of Commerce in France for arbitration. CRH said at the time that it believed its position would be vindicated.

Instead, the tribunal found that Semapa -- which is controlled by businessman Pedro Queiroz Pereira and his sister -- is entitled to exercise its call option. It noted that both Semapa and CRH had committed breaches of their shareholder agreement.

Breaches

CRH was found to have committed breaches related to new investments and the organisation of management within Secil.

It also has to pay 60pc of the arbitration costs and half of Semapa's legal costs. The Irish company said the tribunal had dismissed claims by Semapa for additional compensation.

The tribunal obtained three individual valuations for CRH's stake in Secil, which resulted in a €574.3m price tag on the holding.

The sale of the stake under the call option is to take place within 120 business days -- although this can be extended to 180 business days.

"Semapa is still analysing the award and considering how to proceed in the exercise of its rights upheld in the referred arbitral award," the company said in a statement.

Analyst Barry Dixon at Davy Stockbrokers said the terms of the price determined by the tribunal were favourable to CRH.

He said that based on Secil's 2010 performance, the €574m price tag represented a multiple of over nine times' earnings before interest, tax, depreciation and amortisation (EBITDA).

Secil also has stakes in businesses in Angola and Lebanon.

"The sale of a cement business in a peripheral European country, whose construction sector is likely to be depressed for a number of years, at over nine times EBITDA is a considerable comfort," said Mr Dixon.

He added that the sale would further strengthen CRH's balance sheet.

Shares in CRH, which have been hammered recently due to concerns about economic growth, particularly in the US, closed up nearly 2.6pc at €11.74.

Irish Independent

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