Slowdown in US prompts rethink for CRH

Slowdown in US prompts rethink for CRH
Published: 05 December 2007

CRH has scaled down immediate ambitions for its US expansion by acquiring only a fraction of the US$3.5bn US$4.5bn (Pounds 1.45bn-Pounds 1.9bn) assets it had discussed buying from Cemex of Mexico.

CRH pointed to the credit squeeze and the slowdown in the US housing market as factors behind its failure to agree a price.

Liam O’Mahony, chief executive, said: "Clearly there was a recognition that the short-term outlook had an influence on the price we were prepared to pay. There is nothing tainted about these assets; unfortunately we couldn’t agree on price."

The Irish building services group said yesterday it had acquired the assets that Cemex needed to dispose of in Florida and Arizona in order to win regulatory clearance for its Dollars 14.2bn takeover of Rinker, the Australian building materials group.

In a note to clients, Credit Suisse analysts said the market was likely to welcome the announcement, given the sharp downturn in the US housing market. When preliminary talks with Cemex were first announced in September, Myles Lee, CRH finance director, played down fears about the US economy.
CRH is paying just Dollars 250m for 26 Cemex concrete plants and six block plants in Florida, and two quarries and five concrete operations in Arizona. It is a far cry from the figures mentioned in September, which, if realised, would have been its biggest deal by far.

This year alone the acquisitive CRH has completed deals worth Euros 2bn (Pounds 1.4bn), including taking a 50 per cent stake in Denizli Cement in Turkey and the remaining 55 per cent of Cementbouw in the Netherlands.

It has also expanded in the US, notably in Florida, where it paid Dollars 350m for a rail distributor only a week before announcing its interest in the assets in that state that were involved in the clearance of the Cemex-Rinker deal.

The deal would have been CRH’s largest acquisition. The majority of its deals are with private companies where an announcement has only been necessary towards the end of the process when details are all but finalised. In the case of Cemex, both sides, as public companies, were obliged to announce they were in negotiations.