Shares in CRH jumped by more than 2% on the back of the building materials company receiving approval for its $3.5bn (€2.98bn) takeover of US cement manufacturer Ash Grove.
The Dublin-headquartered group had agreed a deal for Ash Grove last month before a rival bid from Denver-based company Summit Materials surfaced. That pushed out a deadline for Ash Grove’s shareholders to vote on the CRH offer, but that approval was granted late on Friday.
While the deal remains subject to regulatory approval (it is expected to close by early 2018 at the latest) the news of investor approval boosted CRH’s share price by up to 2.3% yesterday, despite a slight paring back of gains in later trading.
The deal is strategically important, said Davy’s Robert Gardiner and Barry Dixon in a joint note, in that it reduces the Irish group’s dependence on third party producers.
“Confirmation of Ash Grove’s approval means that CRH will now acquire the fifth largest US cement producer for $3.5bn. This represents the best possible outcome after two uncertain weeks which prompted fears that the group could get drawn into a protracted bidding war or lose out entirely,” they said.
They called the deal “a real coup” for CRH, with combined finances of amounting of about €110m.
“Ash Grove will be around 7% to 8% accretive to earnings per share without stretching the balance sheet [net debt still being well below two times earnings]. CRH’s financial strength and capital discipline places it ideally to exploit these opportunities,” Davy said.
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