CRH locked in legal battle for Spanish cement firm

CRH locked in legal battle for Spanish cement firm
Published: 06 June 2006

CRH is facing a massive legal battle in Spain, according to local news reports, following Spanish cement company Cementos Portland Valderrivas (CPV) said it has paid EUR 1.09bn for 51% of the Catalan cement firm Uniland. 
 
Uniland has been in dispute with CRH, its largest shareholder, which owns 26.5% of the company. According to local media reports in Spain, CRH went to court in Barcelona, attempting to block any sale of Uniland, claiming it has the right of first refusal on the rest of the company. Uniland is suing Dublin-based CRH, Europe’s third-biggest maker of building materials, over its acquisition of its 26.5% stake. 
 
The stock, bought from holding companies, should have been offered to existing investors first, Uniland said in February. CPV said the deal announced yesterday makes it the biggest cement firm in Spain, with an expected turnover of more than EUR1.8bn in 2007 and core profit (earnings before interest, tax, depreciation and amortisation — EBITDA) of more than EUR600m. 
 
"In principle, we think this deal is strategically positive," said analysts at Banco Urquijo in a note to investors.
 
Banco Urquijo said the enterprise value to installed capacity ratio — a statistic giving an indication of the amount CMV paid for its new production capacity — on the deal was 312 times, which suggests it was dear. 
 
"Strategic opportunities are dear when they are scarce," Urquijo said. 
 
Spanish cement firms have benefited from the country’s construction boom. Spain’s construction sector, a key source of jobs and income for the past decade, saw an acceleration in growth to 5.8% in the first quarter.
 
CPV said after the acquisition, it will have an annual output capacity of EUR18.8Mt. It said shareholders owning an additional 22.5% of Uniland have a five-year put option to sell their shares to CPV at the same price. If exercised, this would raise the cost of 73.5% of Uniland to about EUR1.6bn. In 2005, Uniland had turnover of EUR447m and EBITDA of EUR155m.