Analysis: The consensus yesterday was that CRH's latest, and biggest, purchase is good news for the building materials group and its shareholders.
The Dublin-listed company is set to pay $1.3 billion - just over €1 billion - for Ashland Paving and Construction (Apac), an Atlanta, Georgia-based building materials and highway construction business.
The price eclipses the €800 million that CRH has paid in total for the acquisitions it has made across Europe and the US already this year.
But analysts indicated that Apac was cheap at that price. "It's a little bit below the lower end of market expectations," Merrion Capital's John Mattimoe said yesterday. "We were expecting $1.4 billion or a little bit above that, but they're getting it for $1.3 billion, so that is a good price."
That was the view of market watchers generally, and investors responded positively to the news, sending CRH's share price 30 cent higher, a rise of 1.3 per cent, to a close in Dublin at €25.65.
Mr Mattimoe expects that Apac will add between 1.5 per cent and 2 per cent to CRH's earnings this year, meaning it will add close to four cent per share.
As the group begins to realise the potential $40 million savings that it says Apac will deliver, he believes that this will increase to 2.5 per cent in 2007.
The purchase of Apac will secure CRH's position as the biggest producer of asphalt in the US, the material used to surface roads.
Federal and local governments in the US spend billions every year building or restoring highways, and this deal strengthens CRH's foothold in the market.
Along with this, Apac also produces readymixed concrete and aggregates, the quarried stone material used in road building. The Irish company is a key player in these markets as well.
It also brings new regional ingredients to the CRH mix. The Irish group's US businesses are mainly located in the northeast, midwest and western states. Apac's operations are based mainly in the south and southwest.
CRH chief executive Liam O'Mahony pointed out yesterday that there was very little geographic "crossover" between the two businesses.
It's clear that Apac is going to be CRH's bridgehead into new US territories.
Mr Mattimoe pointed out that it will open the door for the Irish group to go ahead and begin buying smaller businesses in these areas to tie in with its existing operations.
"These would be bolt-ons that would not have made any sense before but will in the future," he said. Mr O'Mahony himself told analysts that CRH would grow the Apac business partly through acquisition.
Apac is highly profitable but high oil prices have eaten into margins in recent years. Oil is used to make bitumen, which in turn is used to make asphalt.
CRH says it is already dealing with this, and Mr Mattimoe argued yesterday that it's been better at managing these costs and passing them on to customers than Apac.
