CRH linked to merger asset sale

CRH has been linked to a joint bid for the assets due to be sold in order to pass the planned mega-merger of French and Swiss cement giants, Lafarge and Holcim.

Holcim and Lafarge are having to offload assets in France, Germany, Austria, the UK, eastern Europe, Canada and Brazil (representing around €3.5bn in annual sales) in order to satisfy regulators ahead of a proposed mid-2015 conclusion to their deal.

While German player Heidelberg Cement and Brazil’s Votorantim Cimentos have been named as possible bidders; a joint bid between CRH and Mexican rival, Cemex has been speculated upon.

CRH — which was making no comment — is in the midst of selling between €1.5bn and €2bn worth of its non-core subsidiary base and, even before that, has capacity of €1.5bn to spend on acquisitions and investments.

The first half of this year saw the cement group spend €130m, 70% down on a year-on-year basis, but management recently said that the second half of the year would likely see an acceleration of spending.

However, the analyst community has mixed feelings as to the veracity of the latest speculation.

“CRH stands out in the industry as having the balance sheet strength to pursue these assets, so a joint bid with Cemex is not an unreasonable view,” said Barry Dixon of Davy Stockbrokers.

He also noted that CRH’s chief executive, Albert Manifold, has indicated his preference for cement assets in developing markets.

“Holcim-Lafarge’s developing market assets are mainly in Eastern Europe and the Philippines. This could leave Cemex taking the assets in the developed markets of Europe and North America. For CRH, such an acquisition — at an attractive multiple — could be significant, in terms of value-creation over the next five years.”

In a recent research note, Robert Eason of Goodbody Stockbrokers noted recent speculation regarding CRH’s ongoing divestment programme, but suggested none of the money raised is likely to be spent on assets from either Holcim or Lafarge “as we believe it is not a frontrunner, given that all of the assets, collectively, are not of interest to the company”.


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