Building materials group CRH is set for its biggest acquisition to date with a recommended £326 million sterling (£369 million) offer for the British brick manufacturer Ibstock. When Ibstock's debt is included, the cost of the acquisition rises to £385 million sterling (£435 million).
CRH's offer is assured of success as it has already snapped up 50.7 per cent of Ibstock shares in the market at the 70p sterling per share offer price. The offer has been given the enthusiastic backing of the Ibstock management which has been looking for a friendly buyer ever since Austrian brick manufacturer Wienerberger bought 29.9 per cent of the company last October.
The 70p-a-share offer represents a 24 per cent premium on the Ibstock price at the close last Friday and is a 59 per cent premium on the price of 44p immediately before Weinerberger bought the 29.9 per cent stake from Brierly Investments for 66p a share.
Ibstock chief executive, Mr Philip Mengel, said the CRH bid had rescued Ibstock from an untenable situation with Wienerberger. He said that when the Austrians took their 29.9 per cent stake, Ibstock had invited bids for the company.
He said that it had become apparent that Wienerberger was "either unwilling or unable to make an offer to all our shareholders. They planned to take an indefinite holding pattern and the board found this position to be untenable", he added.
But CRH finance director, Mr Harry Sheridan, discounted any suggestion that the Irish company is acting as a "white knight" for Ibstock and said that CRH has been evaluating Ibstock since last February and that it fits in perfectly with its own strategy.
He said, however, that the 66p sterling per share paid by Wienerberger for its 29.9 per cent stake had "set a benchmark". Mr Sheridan said that at 70p a share, the acquisition will be immediately earnings-enhancing "and should be very positive in terms of earnings per share".
Mr Sheridan declined to speculate on what attitude Wienerberger will take to the CRH offer, but market sources suggested that given that CRH already has more than 50 per cent of the company, the Austrians probably have little option but to sell to CRH.
Most of CRH's expansion in the past has been through small and medium-sized acquisitions and the £435 million that CRH will end up paying for Ibstock will mean that it will be twice as big a deal as the previous biggest acquisition - the £213 million paid for the American building materials group Tilcon last year.
The Ibstock acquisition will immediately catapult CRH into the joint number one position in brick manufacturing in Britain and will also give it a significant presence in the north east and midwest United States. CRH already has substantial brick manufacturing operations in Holland, Germany and Ireland and according to Mr Sheridan: "CRH believes that the Ibstock businesses represent an excellent fit with the CRH group's strategy and that they can continue to be grown and developed by CRH.
"We've always admired Ibstock's products, they have a lot of good locations and have a good market position and the existing management has done a great job. The company has shown a huge improvement in recent years and we expect that to continue and margins to improve."
He added that the price represents a multiple of about 9.5 times the trading profits for 1998 forecast by London analysts. "It's a good price, we're very pleased."
In the year to December 1997, Ibstock had sales of £320 million sterling and pretax profits of £23.4 million sterling and aftertax profits of £19 million sterling. This represented a substantial recovery on the previous year when sales were the same, but pretax and after-tax profits were £14.3 million sterling and £12.4 million respectively. That recovery continued into the first half of 1998 when pretax profits almost doubled to £15.3 million.
