CRH plans ‘substantial, game-changing’ assets bid

A successful takeover of assets being offloaded to facilitate the planned mega-merger between Swiss and French cement giants Holcim and Lafarge could prove to be a “game-changing” deal for Irish group CRH, analysts believe.

CRH has confirmed it is in discussions aimed at acquiring certain assets being disposed, in an estimated €6bn deal. Holcim and Lafarge are disposing of cement assets in Europe, Canada, Brazil, and the Philippines.

According to Davy Stockbrokers’ Barry Dixon, this would be a “substantial” and “game-changing” deal for CRH.

“The accretion (value created after a particular transaction) to profitability is likely to be substantial. This depends on the multiple of EBITDA (earnings before, interest, tax, depreciation, and amortisation) paid, the quantum of synergies potentially derived, and the funding cost and structure,” he said.

“Assuming the company was to complete the entire deal — ie €6bn of assets at multiple of eight times EBITDA and funded with €5bn of debt and €1bn of equity — we estimate a 16% uplift to earnings forecasts, pre-synergies. Assuming €50m of synergies (1% of acquired revenues) takes this accretion to over 20%.”

Robert Eason of Goodbody said: “We see this as a further potential catalyst for the share price [up by nearly 4% yesterday] if it is accompanied with clear communication from management on the rationale behind taking advantage of what is a unique opportunity and it is completed at a reasonable price.”

CRH has reportedly outbid a number of consortiums, while some sovereign wealth funds thought to be interested in the assets are yet to finalise their bids.