Tuesday 20 August 2019

Cevian pushes for CRH shake-up to boost valuation

Activist shareholder calls for major structural changes at building materials giant to strengthen its performance

Cevian bought a stake in CRH in February and indications are it could raise it to 5pc – worth roughly €1.1bn (stock photo)
Cevian bought a stake in CRH in February and indications are it could raise it to 5pc – worth roughly €1.1bn (stock photo)
Donal O'Donovan

Donal O'Donovan

CRH could double in value in three to five years if it pressed ahead with extensive structural improvements, according to activist shareholder Cevian.

The Stockholm-based Cevian Capital is Europe's biggest so-called activist investor, a type of shareholder that buys stakes in firms and then lobbies for strategic or structural changes, such as asset disposals, to release value.

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"This is an attractive industry and CRH has a strong position in its main markets, but the company has become too complex, both structurally and operationally, which hampers performance and traps value," Cevian managing partner Christer Gardell told Reuters.

"The restructuring work that has been done so far is good, but continued far-reaching structural and operational improvements are needed for the group's assets to reach full potential," he added in Cevian's first detailed comments on CRH since disclosing the stake. He said it had met with CRH's board and chief executive Albert Manifold several times in recent months and was confident they would drive the measures needed.

"They seem to be pragmatic, shareholder-oriented and willing to ask fundamental questions around the businesses," Mr Gardell said.

However, CRH has rejected suggestions its business is too complex. After its most recent financial results the company said its structure had been simplified into three very focused operating divisions to enhance structural and operational performance.

The company has also insisted it has a long-standing record of active portfolio management, including the current focus on divesting between €1.5bn and €2bn of assets.

Cevian bought a stake in CRH in February and indications are it could raise it to 5pc - worth roughly €1.1bn.

CRH is not alone in drawing such attention. US-based peers Eagle Materials and Summit Materials have both also attracted activist attention this year.

CRH is Ireland's biggest corporation. Globally, it has around 90,000 staff and strong market positions in Europe and North America. By Cevian's analysis, raising CRH's margin to the industry mean of 16pc and valuing the company at average peer multiples would warrant a 60pc to 70pc value uplift.

Additional reporting: Reuters

Irish Independent

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