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CRH reinforces U.S. grip with $3.5 billion Ash Grove Cement deal
September 21, 2017 / 2:53 AM / 3 months ago

CRH reinforces U.S. grip with $3.5 billion Ash Grove Cement deal

DUBLIN (Reuters) - Irish building materials firm CRH (CRH.I) is to buy U.S. cement maker Ash Grove Cement Co (ASHG.PK) for $3.5 billion (2.60 billion pounds), wasting no time in using cash from a major disposal to strengthen its North American business.

Already North America’s biggest maker of concrete products and second largest supplier of aggregate materials for construction, CRH said on Thursday the deal would add extensive readymixed concrete, aggregates and logistics assets across the U.S. midwest.

CRH shares rose 4.9 percent in early trading, the top pan-European STOXX 600 performer, as analysts pointed to CRH moving capital into a higher margin business at lower multiples as promised when selling its U.S. distribution business last month in a $2.6 billion cash deal.

It said at the time it would add the proceeds to the 2-3 billion euros already available for acquisitions over the next 18-24 months. The Ash Grove deal, expected to close around year-end, will be financed through existing financial resources.

Goodbody Stockbrokers estimated that CRH was paying a pre-synergy multiple of 11 times Ash Grove’s earnings before interest, tax, depreciation and amortisation (EBITDA).

Davy Stockbrokers suggested a range of 10.5-13.5 times, both far lower than the 16 times EBITDA achieved in last month’s distribution arm sale.

“It is also investing in a business where it has significant synergy and growth potential, which could improve returns even more,” Davy analysts wrote in a note.

Ash Grove, the fifth largest cement manufacturer in the U.S. where it has operated eight cement plants in as many states under the same family for over a century, said the value of the deal was estimated in the range of about $449 to $454 per share based on its balance sheet as of June 30.

CRH is currently its largest customer.

Ash Grove reported profit before tax of $215 million and gross assets of $2.5 billion for the year ended Dec. 31, according to CRH, which made over half of its 1.7 billion euro profit in North America last year.

J.P. Morgan Securities LLC is serving as financial adviser to Ash Grove and Skadden, Arps, Meagher & Flom LLP is its legal adviser.

Additional reporting by Shubham Kalia and Kanishka Singh in Bengaluru; Editing by Amrutha Gayathri and Jane Merriman

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