CRH rights issue will generate €4bn acquisition fund

CRH (Ireland) should be well placed to spend up to €4bn on acquisitions after its €1.2bn rights issue is completed, according to analysts at UBS, which is co-managing the fundraising with Davy, reports the Irish Independent.

Market sources say there is strong institutional demand for the issue ahead of next Wednesday’s deadline for acceptance from shareholders. "You won’t see the underwriters being left with a large rump of stock," said one source, referring to the fact that UBS and Davy, together with BNP Paribas , RBS Hoare Govett and Barclays have guaranteed to buy any new shares that are not taken up by investors.

In a note to clients, the research arm of UBS noted that CRH spent about €3bn on deals in the 30 months following its €1.1bn cash call in 2001 -- which had been the biggest rights issue in Irish corporate history up until now. "Together with €1.6bn of free cash flow to pay down debt and fund acquisitions, we see no financial reason why CRH could not acquire €3bn of businesses, if available," said the UBS analysts, led by Mark Stockdale . "Indeed, we would conclude from this analysis that CRH could easily invest €4bn ... and still be very comfortable on covenant and cash flow metrics," they added.

CRH’s new chief executive, Myles Lee , indicated last week that he was keen to snap up assets that will come up for sale at rivals who had overstretched themselves on the debt front ahead of the credit crisis.