CRH shares soar following €6.5bn deal with rivals
SHARES in CRH closed up more than 7pc yesterday in London and Dublin after the company said its €6.5bn deal to buy assets from rivals Lafarge and Holcim will lead to a wave of new acquisitions over the next 10 years.
CRH chief executive Albert Manifold said the company had been waiting for a decade for such a deal, which will see the firm become the world's third largest building materials supplier.
The transaction, which will see the company expand its global reach, involves the purchase of four specific businesses giving CRH expansion for growth.
Analysts described the deal as strategically important and one that would provide CRH with new platforms for growth in both emerging and developed markets.
"CRH's management is delivering on its promise of recycling capital from businesses disposed of at high multiples into new operations at substantially lower valuations," said Davy analysts Barry Dixon and Robert Gardiner.
"It retains a strong balance sheet and will continue to generate significant free cash flow."
Robert Eason, analyst with Goodbody, which is providing financial advice to CRH on the assets being off loaded by Lafarge and Holcim, said it was a strategically important deal for the company.
"In addition, it provides the group with four strong platforms for future development," Mr Eason added.
Manifold said the company was buying four specific businesses with operations in Britain, France, Germany, central and Eastern Europe, the Philippines and Brazil.
"Quite frankly, we've been waiting a decade for a transaction such as this," Mr Manifold said. "This deal has come at the right time for CRH."
CRH shares closed up 7.7pc in Dublin to €22.97 and 7.2pc in London.
Revenue for the businesses being bought amounts to just over €5bn, with EBITDA of €752m.
The deal is being financed by a combination of about €2bn in cash, around €3bn of new debt and a 9.99pc equity placing, which raised €1.6bn in proceeds before expenses.
Mr Manifold said the deal would lead to a whole new wave of growth for CRH.
"It's a game changer in terms of pace, it's a game changer in terms of growth potential, but no game changer in terms of strategy," Mr Manifold said.
Lafarge and Holcim announced merger plans last year, hoping to cut costs, tackle overcapacity and weak demand by creating the world's biggest cement maker.