CRH up 5% after order to sell stake

IRELAND’S CRH was told by a tribunal to sell its stake in a joint venture with Portuguese cement maker Semapa but the attractive exit terms in a difficult sector sent its shares almost 5% higher.

Fri, 12 Aug, 2011 - 01:00

Padraic Halpin, Reuters

CRH, an Irish building supplies group that is the leading asphalt producer in the United States, bought 49% of Semapa’s Secil unit in 2004 for a total consideration of €429 million including debt, but Semapa wanted to exercise its option to buy it back five years later.

A French tribunal ended the two-and-a-half year dispute yesterday when it ruled that Semapa’s exercise of the call was valid and that the parties were obliged to complete the sale at an equity price of €574m within the next six months.

However based on Secil’s 2010 performance, analysts said the price implies a multiple of nine or ten times earnings before interest, tax, depreciation and amortisation (EBITDA).

“While it is always disappointing to lose a case like this, the sale of a cement business in a peripheral European country whose construction sector is likely to be depressed for a number of years at over nine times EBITDA is a considerable comfort,” said Barry Dixon, analyst at Davy Stockbrokers.

“This gives CRH the strongest balance sheet in the sector which hopefully it will use to replace the Secil business,” Dixon said, adding that the question now was whether, in the current environment, Semapa will wish to complete the deal at such a high price.

Shares in CRH have fallen by over 20% in the last month on concerns over poor US economic data and fears of spluttering growth. Dublin’s local bourse, which CRH forms around one-third of, was 2.3% higher in line with other European stock exchanges after stocks surged early yesterday.

Semapa said in a statement that it was still analysing the award and considering how to proceed.

CRH was also ordered to pay 60% of the arbitration costs and half of Semapa’s legal costs relating to the arbitration procedure, specifically its lawyer’s fees, the Portuguese company added.