Lagan-owner Breedon buys Cemex operations in Britain for €209m

UK building products group Breedon - which owns the Lagan Group in Ireland - is increasing its presence in Britain's troubled building industry with plans to buy facilities in the UK from Mexico's Cemex for £178m (€209m).

It has struck an agreement to buy over 100 Cemex locations, in Scotland, Wales, and England, saying the acquisition will boost its operations and allow it to make cost savings across the group.

"The acquisition is consistent with Breedon's strategy of acquiring earnings-enhancing aggregates-related businesses with strong potential for performance improvements and synergy benefits," it said.

The price tag includes £155m in cash and involves Breedon taking on £23m in lease liabilities for the Cemex's British locations, which generated earnings of €27m on revenues of £178m in 2018.

Breedon said it will finance the cash payment from existing debt facilities. The London AIM-listed shares rose 5% to value the firm at £1.43bn (€1.7bn).

In Ireland, Breedon is the owner of the Lagan Group — one of Ireland’s largest cement, building products, and contractors — which it bought in 2018.

Analysts at Davy said the Cemex British deal "looks inexpensive", with Breedon building its presence in aggregates and asphalt, and includes "28 aggregates quarries, 14 asphalt plants, 49 ready-mix concrete plants, four building product plants, two contracting operations and a cement terminal".

"Breedon’s acquisition of certain Cemex UK assets looks like a strong strategic fit, executed at an opportune time, without overly stretching the balance sheet," the broker said.

Breedon chief executive Pat Ward said the deal was also "a step-change in the development of our national asphalt strategy".

There is potential to drive significant performance improvements across these new assets and they will also strengthen our platform for further organic growth and bolt-on acquisitions.

"In addition to the cost synergies we anticipate, we also expect the deal to be accretive to both earnings and free cash flow in the first full year, with a positive ongoing impact on the cash generation of the enlarged group."