Irish building materials firm CRH has been quick to use cash from selling its US distribution business last month in a $2.6bn cash deal to buy US cement maker Ash Grove Cement Co for $3.5bn.
The acquisition consolidates CRH’s strong US presence adding extensive ready-mixed concrete, aggregates and logistics assets in the US midwest. CRH is already North America’s biggest maker of concrete products and second largest supplier of aggregate materials for construction.
Reuters reports that Goodbody Stockbrokers estimated CRH was paying a pre-synergy multiple of 11 times Ash Grove’s earnings before interest, tax, depreciation and amortisation (EBITDA).
Davy Stockbrokers suggested a range of 10.5-13.5 times, both far lower than the 16 times EBITDA achieved in last month’s distribution arm sale.
“It is also investing in a business where it has significant synergy and growth potential, which could improve returns even more,” Davy analysts wrote in a note.
Ash Grove, the fifth largest cement manufacturer in the U.S. where it has operated eight cement plants in as many states under the same family for over a century, said the value of the deal was estimated in the range of about $449 to $454 per share based on its balance sheet as of June 30.
CRH is currently its largest customer. Ash Grove reported profit before tax of $215m and gross assets of $2.5bn for the year ended Dec 31, according to CRH, which made over half of its 1.7 billion euro profit in North America last year.
