CRH shares slip on mega-deal talk

CRH shares slipped yesterday despite the Irish building materials giant being linked to another mega-deal which could significantly enhance its growth in the US.

Bloomberg reported over the weekend that CRH is nearing agreement to buy Florida-based cement producer Suwannee American Cement from its joint owners — US-based road builder Anderson Columbia and Brazilian cement maker Votorantim Cimentos — for an estimated $750m (€640m). Suwannee operates from one plant in Florida with production capacity of around one million tonnes.

While the report suggested talks are at an advanced stage — and that an announcement could be made as early as this week — it said any transaction could be delayed or even collapse.

Down by 3.5% since the turn of the year, CRH’s shares fell a further 1.5% in Dublin yesterday. The company made no comment on the deal speculation, but analysts were unsurprised at the talk.

“CRH has positioned itself as a natural consolidator of the US cement industry. Therefore, speculation of a further deal comes as no surprise and makes strategic sense with the group set to become a sizeable US cement player. In addition, CRH has plenty of firepower,” said Goodbody analyst, Robert Eason.

Davy’s Robert Gardiner pointed to this deal having the ability to increase CRH’s footprint in Florida, where it already operates a cement producing joint venture in Sumterville.

“Any deal would generate significant synergies for CRH. The group is heavily exposed to Florida operating businesses near Suwannee such as Preferred Materials. Preferred is a leading supplier of asphalt, concrete and concrete products with 16 asphalt plants and 32 ready-mixed plants in Florida,” he said.

Just over a month ago CRH announced the €2.2bn sale of its American distribution division and said it was ready to act further on “a strong pipeline” of acquisition opportunities having spent €1.2bn on purchases in the first eight months of the year. Last month, CRH agreed to buy US-based Ash Grove Cement for $3.5bn (€2.9bn), having previously set a limit of €3bn for its total spend up to 2019.

CRH reduced its debt to just 1.3 times earnings in the first half of this year, and CEO Albert Manifold said the group has balance sheet capacity and was intent on using it.