Monday 18 June 2018

CRH shares surge after deal to cement US dominance

Albert Manifold, CEO of CRH. Photo: Chris Ratcliffe/Bloomberg
Albert Manifold, CEO of CRH. Photo: Chris Ratcliffe/Bloomberg
Ellie Donnelly

Ellie Donnelly

Building materials group CRH has agreed to acquire Ash Grove Cement Company for $3.5bn (€2.94bn) in its latest block buster M&A deal.

The proposed transaction, which is subject to Ash Grove shareholder and regulatory approvals, will be financed through existing financial resources.

For the year ended 31 December 2016, Ash Grove reported profit before tax of US$215m and gross assets of US$2.5bn.

CRH was already its largest customer.

Headquartered in Kansas, Ash Grove operates eight cement plants across eight US states.

The business is stock market-listed, but is family controlled. CRH is paying a near 60pc premium to Wednesday's share price for the business.

The Irish company is the US's biggest maker of concrete products and the country's second largest supplier of aggregate materials for construction,

"Ash Grove is an excellent addition to CRH's portfolio of businesses across North America as we seek to deploy our capital into high quality businesses that enhance our global asset base and provide opportunities to create shareholder value," Albert Manifold, CEO of CRH, said.

"The board of directors believes that CRH will be able to bring Ash Grove on the next phase of its development after 135 years in operation and over a century under the stewardship of the Sunderland family," Charlie Sunderland, chairman of Ash Grove, added.

Last month CRH sold its Americas Distribution business to Beacon Roofing for €2.2bn - exiting a business where it was struggling to build scale.

The company said at the time that the proceeds of the sale would be reinvested, including in acquisitions. CRH shares rose 4.9pc in early trading yesterday, the best performance in Europe, after the American deal was announced.

The shares closed up 3pc at €30.86 each by the end of trading yesterday.

Goodbody Stockbrokers estimated that CRH is paying a pre-synergy multiple of 11 times Ash Grove's earnings, well below the 16 times earnings CRH got when it sold its own distribution arm.

Irish Independent

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