CRH falls on fears of US bidding war

CRH is still tipped to win out in its plans to acquire US cement giant Ash Grove but will likely have to pay more than the $3.5bn (€2.98bn) it had planned for it to fend off an 11th-hour from a US rival.

CRH chief executive Albert Manifold

Shares in CRH fell by as much as 2% at one stage after acquisition target Ash Grove said it had received an offer, valuing it at between $3.7bn and $3.8bn, from an unnamed company, later identified as Summit Materials.

It said it would take about two weeks to consider the new terms.

Last month, CRH said it had struck an agreement ahead of final approval to acquire Kansas-based Ash Grove, which last year generated a pre-tax profit of $215m from its eight cement plants.

The acquisition is part of the Irish company’s renewed expansion in the US, where it already earns most of its profits. Plans by US President Donald Trump to pump billions into America’s dilapidated infrastructure have boosted the shares of many US construction firms this year.

At the time, both CRH chief executive Albert Manifold and Ash Grove chairman Charlie Sutherland — whose family had helped grow the cement firm — hailed the prospects for the bid.

CRH is Ash Grove’s biggest customer and has long had “a close and highly productive relationship” with CRH in the US, said Mr Sutherland.

Darren McKinley, senior analyst at Merrion Capital, said there was a 60% probability that CRH would still secure Ash Grove by increasing its offer by a modest amount and staring out rival Summit Materials.

Valued at €25.9bn, CRH is by far the bigger of the two suitors and should have the wherewithal to secure Ash Grove. It will nonetheless want to avoid being dragged into any bidding war.

The “opportunistic” rival offer was unlikely to disrupt plans by CRH to pursue other US targets as it uses up an estimated €4bn war chest for acquisitions, said Mr McKinley.

“Given CRH’s position as Ash Grove’s largest customer, they are well placed to determine whether a higher offer makes sense or whether to let Ash Grove shareholders decide whether they want cash in hand now from CRH or to merge with a company that is trading on 26 times earnings which currently doesn’t pay a dividend,” he said.

Davy analysts said that CRH is better placed and has the “financial firepower” to increase its offer.

“CRH’s options are now threefold: Pursue its original proposal if Ash Grove continues to see it as a superior bid (there is no indication the new bid is a better proposal); match or better the new proposal, which the group clearly has the financial firepower to do; or walk away if the value is not there for shareholders. Given the group’s track record, shareholder value will be the key determinant of its next step,” said Davy.

CRH’s US operations include a cement plant in Montana, and five cement terminals.


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