CRH shares spike on $3bn unit sale speculation

CRH's shares jumped Tuesday on speculation that the building materials group is preparing to sell its North American glass building products unit, Oldcastle Building Envelope, for more than $3 billion (€2.7 billion).

Bloomberg reported that the Dublin-based group is working with advisers and recently started getting in contact with potential buyers, adding that the business is likely to attract interest from private equity firms.

Shares in CRH rose as much as 3.6 per cent in afternoon trading in Dublin as investors digested the report, before ending the session up 2.7 per cent at €45.61. A spokesman for the company declined to comment.

Growth

Albert Manifold, CRH's chief executive, has been as focused since taking charge 2014 on offloading unwanted and underperforming assets as he has been on continuing the group's history of growth by acquisition.

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“CRH has been an active manager of its portfolio over the last decade, so this speculation is not entirely surprising. It again highlights the shareholder friendly nature CRH takes to its portfolio of businesses,” said Goodbody Stockbrokers analyst David O’Brien.

“Whether a deal comes to fruition or not, the track record built up by management, the growth prospects for the company and the balance sheet strength to supplement this make it a compelling [investment] story.”

Oldcastle Building Envelope generates around $300 million in annual earnings before interest, taxes, depreciation, and amortisation, according to the report. The unit makes glass building products for projects ranging from storefronts and building entrances to shower enclosures and skylights

CRH said two weeks ago that it had spent $1.4 billion on 17 bolt-on acquisitions since the start of January, including $500 million on deals since it last updated the stock market on trading in August. Mr Manifold told analysts the company continue to have a “very healthy pipeline” of deals.

The group has raised $400 million from the sale of unwanted assets so far in 2021, with the proceeds including $100 million of deferred proceeds from prior-year divestments.

Mr Manifold said at the time that CRH is on track to report record full-year ebitda of $5.25 billion amid strong demand for building materials on both sides of the Atlantic, with the group managing to offset rising input cost through price increases for its products. Its previous record earnings were in 2019, when it reported a figure of $4.39 billion.

The company’s ebitda margin widened by half a percentage point in the first nine months of the year, to 17.1 per cent, defying a wider industry trend that has seen margins contract in recent times.

The company said it was “encouraged” by the passing of the $1.2 trillion infrastructure package by the US Congress last month, which significantly increases the commitment to future infrastructure investment in the country.