6th Jun 2022 20:18
(Alliance News) - Broker Davy was upbeat on CRH PLC's deal to buy Barrette Outdoor Living Inc, an Ohio-based maker of residential fencing, for an enterprise value of USD1.9 billion.
CRH is buying Barrette from TorQuest Partners and Caisse de depot et placement du Quebec. It is paying USD1.85 billion in cash, plus taking on USD40 million in capitalised lease liabilities.
Barrette, which will be added to CRH's Architectural Products business, reported USD79 million in pretax profit in the financial year that ended January 1. CRH said the price it is paying represents a multiple of 10 times earnings before interest, tax, depreciation and amortisation - a valuation Irish broker Davy thinks appears "attractive".
Barrette is based in Middleburg Heights, Ohio and operates from 14 locations in total. It was founded in 1975 and now distributes its fencing, railing and outdoor decking for homes in the majority of US states and several regions in Canada.
"In our view, the combination of product sets will further enhance and differentiate CRH's strength within the broader outdoor living space. The primary sales channels – a split of retail and professional – are also similar. We expect that the acquisition can achieve synergies – both cost and revenue – to bring the headline multiple down to sub-8x, a clear enabler of value-creation," said Davy.
Dublin-based CRH noted the acquisition follows the recent divestment of its Building Envelope business and represents a reallocation of capital.
CRH last month completed the Building Envelope sale to KPS Capital Partners LP at an enterprise value of USD3.8 billion, having agreed the deal in February. The sale price included USD3.45 billion in cash, plus the transfer of lease liabilities of USD350 million.
Davy said the Barrette acquisition demonstrates "active and disciplined recycling of capital".
"That business was sold at 10.5x Ebitda as it did not align sufficiently within the integrated solutions strategy; that CRH is able to acquire a business which meets these requirements, and has sustainability characteristics, demonstrates the power of its portfolio reshaping," said Davy.
Shares in CRH closed up 2.2% at 3,306.00 pence in London on Monday. The stock has fallen 12% over the past 12 months.
By Lucy Heming; [email protected] and Tom Waite; [email protected]
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