Irish building supplies groups CRH has agreed to pay 6.5 billion euros ($7.4 billion) for assets that rivals Lafarge and Holcim needed to sell to secure regulatory approval for their planned merger.
CRH, the leading producer of asphalt for road building in the United States, said on Monday the deal would expand its global reach, making it the largest building supplier in central and eastern Europe and the third biggest in the world.
It will fund the purchase, which will double its exposure to emerging markets, with 2 billion euros of cash, new debt and a 9.99 percent equity placing, it said in a statement.
“We are acquiring a quality portfolio of assets, which complement our existing positions, at an attractive valuation and at the right point of the (economic) cycle,” said CRH chief executive Albert Manifold.
Lafarge and Holcim announced merger plans last year, hoping to cut costs and tackle overcapacity and weak demand. Their new company will be the world’s biggest cement maker with $44 billion in annual sales.
The merging firms said the sale ensured their tie-up was on track to complete in the first half of this year, with the vast majority of assets they needed to sell now placed with buyers.
CRH said it was buying assets mainly in Europe, Canada, Brazil and the Philippines and the deal, if completed by mid-2015, would add around 25 percent to underlying earnings in the first full year of ownership. Some 90 million euros of synergies — net of implementation costs — would also be achieved in the first three years post-acquisition, it added.
Merrion Stockbrokers wrote in a note last month that if CRH’s bid was successful, it would be an enormous acquisition by the company’s historical standards and mark a departure from its strategy of making smaller bolt-on acquisitions.
CRH, with annual revenues of 18 billion euros in 2014, beat a consortium led by Blackstone, which people close to the matter told Reuters was also in the running.
CRH was in a stronger position than the buyout firms because it could integrate the assets into its own business, and so offer a higher price, one of the people said.
Holcim and Lafarge initially received more than 60 tentative bids from industry and private equity firms for some or all of the assets.
In a conference call with reporters, the chief executives of the merging firms said the CRH deal price included the assumption by the Irish firm of about 1.3 billion euros of debt.
CRH, which had a net debt of around 2.5 billion euros or 1.5 times earnings at the end of 2014, is also embarking on a disposal plan of its own.
($1 = 0.8843 euros)
REUTERS
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