Building materials giant CRH is set to spend over €1 billion on its biggest acquisition.

The company announced yesterday that its US subsidiary, Oldcastle Materials, has agreed to buy Atlanta, Georgia-based Ashland Paving and Construction (Apac) for $1.3 billion (€1.008 billion) from its parent firm Ashland Inc.

The deal will be the biggest struck by the Irish building materials company, which has already spent more than €800 million on acquisitions in Europe and the US this year.

CRH said yesterday that it intended to borrow the money to pay for the acquisition. Chief executive Liam O'Mahony told analysts that the group's balance sheet was in a strong position and could easily absorb the debt.

Dublin-listed CRH has been in talks with Apac's owner, Ashland Inc, for several weeks. In June it announced that it was carrying out due diligence on the Atlanta-based company.

Apac is a leading US asphalt, quarried material and highway construction company. Last year it had sales of €2.3 billion and earnings before interest, tax and write-offs of €170 million.

High oil prices have hit its margins in recent years, according to analysts. The increased prices have driven up the cost of bitumen, which is used to make asphalt.

Mr O'Mahony said that the group was confident it could manage this and restore margin growth.

He told analysts yesterday that the deal offered scope for savings. "We believe that the acquisition will create $20 million in savings from synergies, rising to $40 million in three years," he said.

The group's statement said that it would provide significant scope for improving CRH's margins and predicted that it would contribute positively to earnings this year.

Apac operates in 16 states across the US, mainly in the south, midwest and southwest, areas where CRH had little or no presence.

Mr O'Mahony said that the US company had strong regional market positions in all its territories.

CRH said yesterday that the purchase was a major expansion into new building materials markets in the mid-western and southern US, and boosted the Irish company's position as that country's biggest supplier of asphalt.

It will also give CRH a bigger slice of the cash that federal and state governments spend on road building and other such projects. "Apac provides increased exposure to US infrastructure spending and a development platform for future growth in new regions," the company said.

Mr O'Mahony indicated that a lot of the growth in new regions would come through further acquisitions, mainly of smaller "bolt-on" businesses operating in its sector.

Apac's management, including president Kirk Randolph, will continue to run the business, which will become part of CRH's Americas materials division.

Mr O'Mahony said in a statement that the deal represented a major milestone for the Irish company and confirmed that it was the largest completed by CRH in its history.

Investors reacted positively to the news. CRH closed 30 cent up at €25.65 in Dublin last night. CRH expects to complete the purchase by the end of the month.