22nd Nov 2023 11:28
(Alliance News) - SigmaRoc PLC's acquisition of CRH PLC's lime offering in Europe is a "once in a lifetime" chance for the buy and build firm to become a market leader in the sector.
For CRH, meanwhile, it is a chance for the firm to sharpen its focus elsewhere.
SigmaRoc, a London-based buy-and-build group targeting construction materials assets, will fork out EUR1 billion should all aspects of the three-part deal be completed.
SigmaRoc will pay EUR745 million for the "deal one targets", which include assets in Germany, Czech Republic and Ireland. To partly fund this part of the deal, SigmaRoc announced a placing of 421.1 million shares at 47.5 pence each, raising GBP200.0 million.
The placing will be conducted through a bookbuild. Its retail investor base can also partake, through a REX intermediaries offer. The placing shares will represent just under 38% of the enlarged stock capital.
Prior to its suspension, the stock last traded at 50.20p. It had a GBP348.3 million market capitalisation.
It will also draw down EUR350 million from new loan agreements, which will also go towards funding the first part of the deal. The financing includes a five-year term loan worth EUR600 million, a EUR125 million one-year bridge loan and a EUR150 million revolving credit facility. The revolving loan has a EUR100 million uncommitted accordion option.
The deal two target is UK-based Tarmac Shelfco Ltd. The deal three asset is Polish firm Ovetill Investments Sp Zoo. SigmaRoc has call options on these firms, though it added there is no guarantee it exercises these. If it did, it will fork out EUR255 million for both assets, taking the total sum for the three deals to EUR1 billion.
Shareholders will vote on the first deal, due to its size, at a general meeting to be held on December 11.
If acquired, the new assets will sit alongside SigmaRoc's Nordkalk, bought back in July 2021. The firm at the time said the Nordkalk deal had made it a "sizeable limestone and lime operator".
"The acquisition of Nordkalk was significantly earnings enhancing in its first full year of ownership by SigmaRoc and the directors believe that there is continued potential to further drive earnings growth," it said on Wednesday.
Investment bank Liberum labelled the deal a "once in a lifetime opportunity to build northern Europe's leader in lime and limestone".
"CRH's assets are extremely complementary to Nordkalk's," it added. "We prudently estimate the transaction is earnings accretive by around 28% as synergies are delivered."
It's a deal that also strengthens SigmaRoc's investment case, Liberum added, believing the firm will be a "focused industry leader capable of generating free cash flow in excess of GBP100 million". The placing to part fund the deal will be the last time SigmaRoc goes cap in hand to investors, Liberum predicted.
Building materials firm CRH is fresh from striking a deal of its own. It said it struck an agreement to acquire cement and ready-mixed concrete assets in Texas for USD2.1 billion on Tuesday.
Chief Executive Albert Manifold said on Wednesday's disposal: "The decision to divest at an attractive valuation follows a comprehensive review of the business and demonstrates CRH's active approach to portfolio management. The proceeds from the divestment will provide us with significant additional capital allocation opportunities to deliver further growth and value creation for our shareholders."
The combined lime businesses it is selling generated USD610 million of sales in 2022.
Analysts at Irish broker Davy commented: "CRH's divestment of its lime operations in Europe highlights its proactivity in shaping its portfolio around its integrated solutions strategy. Combined with the acquisition of materials assets in Texas, it also adds to the group's growth prospects."
CRH on Tuesday lifted its annual outlook. It said net sales in the nine months to September 30 were 8% higher on-year at USD26.3 billion. Earnings before interest, tax, depreciation, and amortisation surged 14% USD4.8 billion.
CRH's double-digit Ebitda growth was aided by margin expansion. Its Ebitda margin increased by 100 basis points on-year to 18.1%.
CRH lifted its annual Ebitda outlook to USD6.3 billion, from its previous guidance of USD6.2 billion. The new forecast would represent a roughly 13% climb from the USD5.6 billion achieved in 2022.
In addition, it will lift its dividend by 4.7% to USD1.33 per share in 2023, from USD1.27. It added that it will transition to paying quarterly dividends in 2024, instead of its current policy of two ordinary dividends per year.
Earlier in 2023, CRH paid an interim dividend of USD0.25, up 4.2% on-year from USD0.24. Its forecast for the full-year implies a final payout of USD1.08 per share.
CRH shares traded marginally lower at 4,871.00 pence each in London on Wednesday morning.
By Eric Cunha, Alliance News news editor
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