CRH plots bid for €600m South African cement group

CRH has registered its interest in bidding for South Africa's Pretoria Portland Cement (PPC), putting itself at the centre of a potential bidding war for a business that has a market value of 10.1 billion rand (€600 million).

“PPC has received a non-binding expression of interest from CRH plc, indicating that it is considering submitting an all-cash proposal to acquire a controlling stake in PPC,” the Johannesburg-listed company said on Monday. A spokesman for CRH declined to comment.

Move

CRH’s move comes two months after a unit of Canadian investment firm Fairfax Financial said it intended making a partial offer for PPC, on condition that the South African company merges with smaller rival AfriSam Group. PPC said late last month that Franco-Swiss building materials group LafargeHolcim had indicated its interest in buying the company.

Like Fairfax and LafargeHolcim, CRH is set to be given access to material to carry out due diligence on PPC and an opportunity to submit an updated expression of interest during the week commencing November 20th, which will include a value per share for the company, the South African group said.

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“Historically, it would have been unusual for CRH to enter a bidding situation for a listed company, given management’s preference for purchasing unlisted businesses at lower valuation multiples,” said David Holohan, chief investment officer with Merrion Capital in Dublin.

“However, PPC is South Africa’s largest cement maker, providing a rare opportunity to acquire a market leading player, justifying CRH’s expression of interest and possibly competing against industry heavyweight LafargeHolcim and Fairfax Financial.”

Trail

CRH, which had had previously been reported to be interested in PPC, returned to the acquisitions trail this year after taking a breather and lower its debt burden to absorb a record €8 billion of deals carried out in 2015. These included some €6.5 billion of assets hived off by Lafarge and Holcim two years’ ago to appease competition authorities ahead of their own merger.

CRH's move comes less than a month after the building materials giant's $3.5 billion (€3 billion) offer for Kansas-based Ash Grove Cement was accepted by shareholders in the US company.

In August, Ireland’s largest publicly-quoted company, led by chief executive Albert Manifold, announced the sale of its US distribution business, Allied Building Products, for $3.63 billion to Beacon Roofing Supply as it revealed that it is buying German lime and aggregates producer Fels for €600 million.

Shares in CRH fell as much as 2.2 per cent in Dublin on Monday, valuing the group at €25.1 billion.