IRISH BUILDING materials giant CRH has agreed to sell its European insulation business to Cavan-based Kingspan for €120 million.

Kingspan, which is led by Gene Murtagh, said it intends to fund the deal from its own cash resources. It is buying the business free of cash and bank debt.

An additional €6 million might be payable to CRH if certain future earnout conditions are met.

CRH’s insulation business had been on the blocks for some time, and the deal is subject to regulatory approvals.

The business is a market leader in polyisocyanurate and expanded polystyrene products, which are used for thermal insulation. It has six business units operating in seven countries.

Kingspan said the integration of CRH’s insulation unit would “produce efficiencies and cost savings” for the Cavan group.

“Whilst recognising the current weakness in many markets, this acquisition presents Kingspan with a unique opportunity to establish longer-term market leading positions in western Europe,” the company added.

In 2009, CRH’s insulation business had revenues of €240.5 million and Ebitda (earnings before interest, tax, depreciation and amortisation), excluding exceptional items and management charges, of €19.8 million.

Ebitda for the current financial year is expected to be about €11 million. Operating profit last year was €10.6 million, excluding exceptional items and management charges. The company also had net assets of €102.8 million, excluding goodwill.

Kingspan said the acquisition is expected to be earnings neutral in 2011 after restructuring costs, and thereafter earnings enhancing.

Mr Murtagh said this was an “excellent opportunity” for Kingspan to become a leading player in the European insulation sector.

Myles Lee, CRH’s chief executive, said it was selling the insulation business because there was no potential “to gain a market leadership position in Europe”.

CRH’s shares closed down 2.6 per cent in Dublin yesterday at €13.30, while Kingspan was up 1.4 per cent at €6.02.