CRH share price up, to buy €6.5 billion of assets from rivals

Irelands building supplies company CRH Plc announced on Monday it had agreed to spend €6.5 billion in order to acquire assets from rivals Lafarge and Holcim.

The two companies are selling parts of their businesses to get regulatory approval on $40-billion merger. The assets, subject to the deal, include operations mainly in Europe, Canada, Brazil and the Philippines and generated a revenue of around €5.2 billion in 2014, the companies said in a joint statement.

After the deal closes CRH, which is already the main provider of asphalt in the US, will become the biggest building-materials provider in eastern and central Europe and the third-largest in the world.

The agreement also marks CRHs largest purchase so far. In contrast to rivals Holcim, Lafarge, Cemex and SAB, which launched a series of debt-financed agreements around ten years ago in order to jump-start global growth, CRH has been steadily growing by acquiring smaller companies.

“This is not a shift in strategy for us – normally we do around €2 billion worth of acquisitions per year. This is just compressing two-and-a-half years of those transactions into a single deal,” said Chief Executive Officer Albert Manifold.

The company said it will fund the deal with new debt, €2 billion of cash from its balance sheet and it will sell 9.99% of it overall shares.

CRH said the acquisition would lift adjusted earnings per share by about 25% within one year of ownership, with return of equity to hit high teens in 2016.

Synergies, or savings, from the acquisition are expected to land at €90 million in the first three years after the deal is closed. The agreement will also add around 15 000 employees spread across eleven countries, including Canada and the US, to CRHs workforce.

The asset sale, which is expected to be closed by mid-2015, is one of the final steps for France’s Lafarge and Switzerland’s Holcim in order to get an antitrust approval on their deal. The merger, which was announced in April and is expected to close during the first half of 2015, would create the worlds biggest cement maker.

“This transaction represents a significant value creation opportunity for CRH. We are acquiring a quality portfolio of assets, which complement our existing positions,” said Mr. Manifold. “Not all of these assets are going to remain long term in our group,” he added.

After the news on Monday, CRH gained 4.60% to €22.295 at 14:04 GMT, marking a one-year increase of 16.94%. The company is valued at €15.79 billion.