CRH rises on private equity rumours

SHARES in CRH surged as much as 5% yesterday as speculation mounted that the building materials giant could be a takeover target.

The shares, which have already gained about a fifth since the beginning of the year, have been heavily traded in recent weeks on rumours that private equity firms could now have Ireland’s biggest company in their sights.

A takeover of CRH would be the largest takeover in Europe by a private equity group, topping the bid by Kravis Kohlberg Roberts for Alliance Boots.

However, some analysts were sceptical about the prospect of a bid emerging and the shares eased back a little later in the day.

“There’s a lot of deal hype about the sector at the moment, and this rumour about CRH is part of that,” said Kevin McConnell, head of research at Bloxham Stockbrokers in Dublin.

“To me it’s just not credible at the moment given the movement we have already seen in CRH’s valuation. I would add the caveat that nothing private equity does is surprising.”

Shares in CRH, which replaced AIB as Ireland’s biggest company, closed up at €32.29, a gain of 2.2% and giving it a value of €20.5 billion.

Almost four million shares changed hands yesterday, slightly greater than the average daily volume.

The shares have also spiked in recent weeks as the cement industry has seen some consolidation with Germany’s HeidelbergCement agreed to buy Hanson in mid May.

A research note earlier yesterday from Goodbody Stockbrokers said CRH shares could be worth as much as €45 based on the price paid by Bain Capital, Carlyle Group and Clayton Dubilier & Rice to takeover American DIY chain Home Depot.

If a takeover bid for CRH did emerge it would almost certainly lead to a break up of the company.

The scale of the takeover alone would make a bid difficult to mount and would require several private equity firms to fund a takeover.

CRH made pre-tax profits of €1.6bn in 2006, 25% higher than in 2005 on sales of €18bn.

A deal of this size would be Europe’s biggest private equity takeover, though still below the world’s largest, which is the €34bn buy-out of Texas power company TXU by Kravis Kohlberg Roberts and TPG.