UK construction materials group Breedon to buy Lagan for €527m
Deal will give Breedon footprint in Irish market
The acquisition of the Lagan Group, which includes the group’s cement business in Kinnegad, Co Westmeath, marks the first time Breedon has invested outside Britain, and is its first investment in the Republic. Photograph: iStock
UK construction materials group Breedon will acquire Belfast-based Lagan in a £455 million (€527m) cash deal. The move will extend Breedon’s geographic footprint in Britain and into Ireland, with what the company said would be immediate critical mass in Ireland.
The purchase will see Breedon enter the Irish construction market, with further opportunities to expand in the aggregates business and through the asphalt and ready-mixed concrete operations.
The deal is on a cash and debt free basis, payable on completion. It will be financed by a new £150 million term loan, a new £350 million revolving credit facility that replaces Breedon’s existing £300 million revolving facility, and a £170 million equity placing of some 222.2 million ordinary shares at 76.5p per share. Of this, more than 65 million shares are classed as clawback placing shares, and are subject to a right of recall.
Breedon’s chief executive Pat Ward said Lagan was a “unique opportunity” to enter a growing market with immediate scale and excellent opportunities for expansion. “It significantly strengthens our cement offer, adds to our mineral and downstream resources, brings us a bitumen import/export business and adds real weight to our contract surfacing operations.”
The acquisition of Lagan, on a pro-forma basis for 2017, would have generated turnover of some £900 million and earnings of £163 million, and offered the group growth potential.
“We’re not buying this business for 2018...it’s a long-term play, which is why it’s not about stripping costs out of the business. We want a business that’s solid with a good foundation, ” he said.
Mr Ward said he approached Lagan about a possible sale of the company having identified the synergies when the two groups embarked on a joint venture in Aberdeen, Scotland, some two years ago. “It became apparent to us that, culturally, we were quite aligned with the Lagan Group, and vice versa. You don’t often get the opportunity to buy something that’s ready-made.”
The acquisition of the Lagan Group, which includes the group’s cement business in Kinnegad, Co Westmeath, marks the first time Breedon has invested outside Britain, and is its first investment in the Republic, although Mr Ward said that Brexit was not a consideration in the deal.
“We’ve been doing transactions over the last year or so, and I would say that in every transaction we’ve done, Brexit has never been a consideration,” he said, noting that Breedon’s market was predominately in the UK, while of Brexit itself, he said: “Who knows what’s going to happen?”
He does, however, concede that an outpost in the EU may be useful in time.
“From a banking perspective, it could be a clever Brexit hedge as a certain proportion of your revenues will be euro.”
The sale does not include Lagan Homes. “We never contemplated it,” Mr Ward said. It is one of the largest house-builders in Northern Ireland, with turnover of some £76 million in 2017.
Another Kevin Lagan business, LF FastHouse, a manufacturer of modular closed panel and timber frame systems, is also unaffected by the takeover.
However, while Kevin Lagan will now concentrate on these companies, his brothers Terry and Jude, as well as Mark Kelly, managing director of Whitemountain, will retain their roles within the Lagan Group under Breedon’s ownership, and under the oversight of Mr Ward.
The deal is expected to close on Friday, but Mr Ward said a name change was not on the imminent horizon. “We haven’t got that far yet,” he said.