Kingspan pays €98m for Century Homes

 

The chief executive of Century Homes, Gerry McCaughey, stands to receive more than €31 million from the sale of the timber-frame house builder to Kingspan for €98 million.

Mr McCaughey, his brother Gary and the company's technical director, Jim McBride, will each get €23.7 million upfront in return for their shareholding of 32 per cent apiece.

The company's marketing director, Paul McDonald, stands to make nearly €3 million for his 4 per cent stake in the 15-year-old Monaghan-based company.

In addition to an initial cash payment of €74 million, Kingspan is to pay a further €24 million over three years to the Century shareholders, provided specific profit targets are met.

Century, which employs 460 people in plants in Dungarvan, Monaghan, Longford, Cardiff and Newcastle, as well as in a sales and engineering office in London, is the biggest timber-frame building company in Europe.

The company has a market share of 25 per cent in Ireland.

Since its establishment in 1990, it has helped drive the number of timber-frame houses built in Ireland from just 1 per cent of the total to around a quarter.

Mr McCaughey believes that this will continue to rise until it reaches more than half of all Irish house starts.

But the real growth opportunity for Century, and its new owners at Kingspan, is the English market where just nine per cent of houses are built using such methods.

"It has always been my dream to grow Century Homes into the largest and best timber frame company in the world and, as a result of this deal, that dream can become a reality," Mr McCaughey said yesterday.

Kingspan said the acquisition, which will cost it a maximum of €91 million when account is taken of Century's cash balances of €7 million, would be earnings-enhancing from the outset.

Shares in the company surged following news of the acquisition, as analysts moved to upgrade their forecasts and share-price targets for the company.

The stock closed 60 cent, or nearly 7 per cent, higher at €9.45.

Brokers believe it could add 4 to 5 per cent to earnings per share at the Cavan-based company this year and 7 to 8 per cent in 2006.

The acquisition will see sales in Kingspan's offsite and structural division rise to around €200 million, from €120 million last year, accounting for up to a fifth of the company's business.

It will also expand Kingspan's exposure to the residential construction sector from around 30 per cent of its business to closer to 40 per cent.

Under the terms of the deal, Century's senior management, including Mr McCaughey, will remain with the company.

The acquisition, which is being funded from Kingspan's existing resources, is subject to approval from the Competition Authority.

The success of Century is a rags-to-riches tale.

Having emigrated to Los Angeles after university and established a successful decorating business, Mr McCaughey became convinced that timber housing had a future in Ireland.

As a result, he decided to return to Monaghan late in 1989, where he set up shop in a dilapidated warehouse.

Despite the recent recession and the might of the concrete lobby, the company went from a small loss in its first year of operation to reporting operating profits of €9.6 million on sales of €67 million last year.

Century is currently working on building a new manufacturing site in Tullamore, its sixth plant, which will employ 120 people.

It aims to double its turnover over the next five years, which would see its total workforce grow to 600.