Friday 23 March 2018

CRH shares soar on US and German M&A deals

Albert Manifold of CRH
Albert Manifold of CRH
Donal O'Donovan

Donal O'Donovan

CRH shares soared to a nine-year high, boosting the value of Ireland's biggest company by around €1bn yesterday, as the market lapped up a two-handed M&A announcement.

The building materials giant announced the sale of its US distribution business, Allied Building Products, for $2.63bn (€2.2bn) to Beacon Roofing Supply and at the same time said it is buying German lime and aggregates producer Fels for €600m.

The US business is being sold at a multiple of 16 times earnings compared to the seven times earnings, post synergies, that CRH is paying for its German acquisition.

The remaining US cash will go towards a pipeline of further acquisitions targeted mainly at the core developed markets, CEO Albert Manifold said.

CRH could spend a further €2bn to €3bn on acquisitions between now and 2019, he said.

He said the business had no bias in favour of buying in Europe over the US, but was more cautious on investing elsewhere.

"It is highly unlikely we'll do anything brave of heroic in emerging markets anytime soon," Albert Manifold told reporters yesterday.

Currency volatility and the switch off of some infrastructure spending following a presidential election last year have hit CRH's business in the Philippines acquired in 2015.

However, in China, CRH is well positioned to benefit if the country's Belt and Road strategy to boost export infrastructure translates into a ramp up in spending on roads and ports infrastructure, Mr Manifold said.

CRH is selling its Allied Building Products unit in the US to a larger rival 20 years after initially investing in the business having fallen behind in the race to consolidate the sector by bigger spending rivals, including Beacon Roofing Supply, Mr Manifold said.

The German lime business has been on CRH's list of target for two decades and will complement the group's assets in Carlow, the UK and in Poland and makes CRH number two in the European market, he said.

The Fels deal and €600m spent on a number of smaller acquisitions is well up on last year's investment levels, but less than the €8bn CRH laid out on two major deals in the first six months of 2015.

The group reported sales of €13bn in the first half and said it expects earnings growth in the Americas and Europe in the remainder of 2017.

Operating profits increased 10pc to €647m in the six months to June 30, versus the same time last year.

Shares were up 4.7pc at one stage and ended the day up 3.9pc.

Irish Independent

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