CRH is moving into Paris through a planned £7 million acquisition of a 50 per cent share holding in a chain of building merchants.
It is buying the interest in Materiaux Service, which has 14 builders merchant businesses in the greater Paris area. Materiaux has a share quotation on the horscote (over the counter) market of the Paris Stock Exchange.
The investment is being facilitated by CRH's acquisition of a 50 per cent share holding in a company called Iraty which intends to make a public offering for the 33 per cent of Materiaux currently quoted on the Paris exchange.
If this offer is accepted, CRH will end up with an effective 50 per interest in Materiaux.
lraty has a majority interest in Materiaux and after the public offering it would have 100 per cent. The tender offer is 450 francs per share compared with a market price of 300 francs, prior to the announcement.
The 50 per cent premium should provide a strong incentive for the minority shareholders to accept the tender offer.
CRH says this latest move will give the group a strong regional base in the important French market and it forms part of an expansion strategy in mainland Europe, to balance its geographical spread.
Materiaux operates in the Ile de France area which has a population of over 12 million people and is "France's most important market".
Mr Brian Hill, group managing director of CRH mainland Europe, said the expansion is a welcome step into a major new European market.
CRH believes that its "proven track record in the builders merchanting industry in the UK and the Netherlands will enable us to contribute to Materiaux Service's growth and profitability".
Materiaux generated a trading profit of £1.5 million on sales of £68.8 million in the year ended December 31st, 1995. The consideration includes the provision of a loan to Iraty and is on a profit multiple of 9.3. Goodwill is expected to amount to £1.6 million.
The company had been losing money up to a couple of years ago when new management turned it around, said CRH finance director, Mr Harry Sheridan. However, the profit margin is still a slim 2.2 per cent.
Mr Sheridan noted that last year's profits were achieved in a difficult construction market. Three of the 14 outlets incurred losses because of rationalisation costs. He intended to push the margins up to 3 per cent plus.
Existing management, under Mr Thibaut d'Aligny, will continue to operate the business. CRH will have 50 per cent board representation.
Asked about the remaining 50 per cent of the equity which will be held by Iraty, he said the acquisition is a "crunching exercise" for CRH which will have to see "if it works out well".
He said CRH is interested in expanding further in France. This is CRH's first move into the French market for 20 years.
It bought a small bricks and mortar business in the early 1970s which did not work out and it quickly exited from the business.
