CRH has acquired CPM Development Corporation, a Washington building materials group, for up to $94 million (£62.7 million). This is its third-largest acquisition in the US, after Tilcon and Allied Building Products. CRH has spent £110 million on acquisitions so far this year. Although well below the record £418 million spent in 1996, it is close to 1995's level of £129 million. Following the acquisition, the group's expanded US materials businesses will have sales of some £1 billion, an annual output of 400 million tons of aggregates, 15 tons of asphalt and 2.7 million cubic yards of ready-mixed concrete. The consideration includes a deferred payment of $18 million. Most of this will be phased over a number of years but a small part will be based on targeted earnings. The acquisition, based on 1996 earnings, should add about 0.8p to earnings per share, said Mr Myles Lee, CRH's general manager, finance.
It will add about five percentage points to gearing which is still expected to be in the low 30s by the end of this year, provided there are no more acquisitions. However, the group is continuing to seek out further suitable opportunities. It appears likely that there will be more takeovers before the end of the year. CPM, founded in 1930, is a manufacturer of aggregates, asphalt, ready-mixed and pre-stressed concrete, based in Spokane, Washington. It had a strong market position in eastern Washington, northern Idaho and northern Oregon, CRH said. Its aggregate reserves amount to 180 million tons.
CPM also operates two packaging facilities and has a modern concrete block plant. The US company has had a good trading record with a "consistent performance", according to Mr Lee. It generated a trading profit of $14.1 million on sales of $131 million in 1996. Pre-tax profit amounted to $14.6 million, which puts the consideration on an acceptable multiple off 6.4. CPM has generated the same level of profits so far this year. Its shareholders funds were $70 million at the end of last year. No goodwill would arise from the acquisition, CRH said. The takeover is seen by CRH as another major step in the expansion of its Oldcastle Materials Group's western division. This follows the acquisition of Staker in 1995, Parson in 1996 and Burnett Construction and San Juan Concrete this year.
CPM was controlled by the Murphy family. The existing management under the president, Mr Michael Murphy, will continue to run the business, as a stand-alone unit within the Oldcastle Group. CRH recorded a modest 2 per cent rise in pre-tax profit to £65.7 million in the six months to June 30th, 1997. This was mainly due to higher interest costs and lower profits from North America. Strong growth has been resumed in the second half and pre-tax profit could rise by some 20 per cent in the full year to £230 million.
All geographical areas are expected to make a positive contribution with the exception of Spain.
