CRH is issuing 19.57 million new shares - about 5 per cent of the group's ordinary stock - to raise €350 to €380 million (£275 to £290 million) to fund future acquisitions. Chief executive Mr Liam O'Mahony said the funds were not earmarked for any specific acquisition but would be used to respond to an increasing number of opportunities worldwide.
Announcing the placing yesterday, the group did not specify the price at which the shares would be placed but the market responded by marking the shares down 5.5 per cent at €18.75.
CRH is carrying out a global bookbuilding exercise in which potential investors are being invited to indicate by 3 p.m. tomorrow, whether they wish to participate in the placing.
Finance director Mr Harry Sheridan said the group would announce the issue price by about lunchtime tomorrow. The group would use the placing to broaden its shareholder base and to bring in a number of euro zone institutions which had expressed interest, Mr Sheridan said.
Institutions from this region held about 12 per cent of CRH, compared with 20 per cent each held by Irish, UK and US institutions, he explained.
UBS Warburg and Davy Stockbrokers are lead managers to the placing. The placing will dilute the stakes of existing shareholders by 5 per cent. Dealing in the new shares is expected to start on September 11th. The shares will be listed in Dublin and London.
CRH said the decision to raise the cash arose because of a significant increase in the number and size of acquisition opportunities as the building material industry worldwide continued to consolidate.
CRH had 14 development teams operating throughout Europe and the Americas assessing potential acquisition targets, Mr O'Mahony said.
In the first half of 2000, CRH spent €931 million on more than 30 acquisitions. This followed acquisition expenditure of €1.4 billion in 1999 on more than 40 deals. CRH has traditionally financed acquisitions largely out of cash-flow and borrowings.
Strong acquisition activity has driven up the group's debt/equity ratio to 119.5 per cent at the end of June last from 53.5 per cent at the end of June 1999 and 73.9 per cent at the end of December 1999. Interest cover has fallen to 5.3 times earnings before interest and tax from 8.9 times at the end of June 1999 and 7.2 times at the end of December.
By year end the funds raised - assuming no further acquisition spending and with second-half profits - would help to lower the debt equity ratio to about 65 per cent and raise interest cover to eight times earnings before interest and tax.
CRH said that raising the extra funding now would support its ongoing development strategy and broaden its investor base.
