Kingspan shares jump 3% after €60m US acquisition

Shares in Kingspan jumped more than 3% yesterday on the back of the Cavan-based building materials group spending over €60m on a strategic acquisition in the US.

The insulation specialist announced yesterday that it has reached agreement to purchase the building insulation division of US packaging firm, Pactiv for $82m (€61.3m), with the deal subject to local approval of licence and permit transfers.

Kingspan chief executive, Gene Murtagh said the latest investment represents “a new and exciting frontier” for the group’s insulation products business in North America, as it provides particular exposure to the residential market there.

“It is a tremendous opportunity for Kingspan to build upon the growing success of our existing insulated panel business throughout the region, and at a time when North America’s focus on energy efficiency and security is at an all-time high,” he added. Speaking after the company’s AGM, in May, Mr Murtagh commented that Kingspan, which has its headquarters in Kingscourt, Co Cavan, had up to €500m available to spend on acquisitions and had the appetite for several deals.

At that stage, he said management had identified four or five potential targets and was looking to grow its presence in places like Brazil, North America and mainland Europe.

“Given that Kingspan was generating significant cash and heading towards zero net debt, using its financial firepower is to be welcomed,” said Davy Stockbrokers’ Flor O’Donoghue, yesterday.

The company’s share price was up by over 3.2%, at €12.99 yesterday. Kingspan has seen market gains in North America, this year despite little overall recovery evident in the territory. But, this deal is being viewed as giving the group significant long-term potential in the region.

“The business has been acquired on a very attractive multiple of 6.4 times EBITDA and we estimate it will add 3c — around 5% — to earnings in full-year 2015. Given the strength of Kingspan’s balance sheet, there is still significant headroom for management to continue taking advantage of such development opportunities,” according to Robert Eason of Goodbody Stockbrokers.