Activist investor likely to increase stake in Ireland's largest multinational

Activist investor likely to increase stake in Ireland's largest multinational

Europe's largest activist investor is likely to keep building a stake in CRH with the aim of taking a seat on the building materials group's board.

It was revealed that Cevian Capital acquired a stake of just under 3% in Ireland's largest multinational.

CRH shares rose as much as 4% to close 2.3% higher.

Cevian is one of a number of high-profile activist shareholders which invest with the purpose of driving corporate changes to boost the stock market value of the firms in which they invest.

The track record of Stockholm-based Cevian suggests it makes investments in companies for between one and seven years. In most cases, it secures a seat on the board. And it portrays its approach as working with amenable managers without “screaming and shouting”.

Cevian appears to see CRH as being undervalued by the stock market, with its margins trailing its peers and with little organic revenue growth and a strategy based on making acquisitions.

While the Swedish investor may look for some asset sales and cost efficiencies to improve margins, it is understood to be unlikely to seek a large-scale break-up of CRH's international businesses.

CRH is valued at almost €22bn, but its shares - down 18% over the past two years - have fared worse than the combined European index for construction and building materials stocks.

Its profitability is also below that of rival companies LafargeHolcim and HeidelbergCement. CRH is, however, in the midst of a €1bn share buyback programme and is conducting a review of its European distribution business in a bid to improve shareholder returns.

The company has spent big in the last few years, buying US cement maker Ash Grove for around €3bn and paying €6.5bn for some assets following the merger of Lafarge and Holcim. Last year CRH said it has €650m to €700m a year to spend on acquisitions. It is hoping to generate €7bn in cash, before asset disposals, over the coming four years and to use the money to fund acquisitions, increase dividends and possibly buy back more shares.

Cevian is best known for its shareholding in Volvo which earned it a huge profit of over €2bn when it sold its stake in the automaker to China’s Geely, in late 2017. Along with well-known US activist shareholder Elliott Management, Cevian has been active in Thyssenkrupp, the lifts to car parts conglomerate. It has a stake in engineering giant ABB and owns a shareholding of over 12% in air freight firm Panalpina, where it insisted its chairman should step down.

It is also the single largest shareholder in Ericsson.

In an interview last month on Bloomberg Television, co-founder Lars Forberg portrayed Cevian as an activist shareholder that went about its business in a quiet and non-aggressive way.

He said Cevian was “a constructive activist” that works with the right management and will have a long term strategy of “three, five, seven years” that tackles all aspects of the company it has invested in.

At Thyssenkrupp, Mr Forberg said the conglomerate needed simplifying, and the process would take time. At ABB – which also makes power grids – its involvement ensured the company created four divisions. It bought a 2.3% stake in Scandinavia’s largest bank, Nordea, before Christmas.

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