CRH, the largest company on the Irish stock market, is planning to quit the Dublin exchange as it seeks to ensure that it will be eligible for inclusion on the influential S&P 500 Wall Street index.
The move will come as a massive blow to Irish stockbrokers and Euronext Dublin, the operator of the Irish market, who had been hoping CRH would retain its secondary listing in the Republic even as it advanced a plan to move its primary stock quotation from London to New York.
The building materials giant will remain headquartered and tax resident in Ireland. However, it is believed its advisers think it would be easier for the S&P 500 committee to include the company on the benchmark index if it were not also listed in Dublin, where most of the trading volume in the stock takes place.
Irish HQ
“The achievement of US equity index inclusion is critical to this move. We have received clear and consistent advice from our advisers that to be successful in achieving US equity index inclusion, CRH will need to delist from Euronext Dublin,” said Jim Mintern, CRH’s chief financial officer, in response to questions from The Irish Times.
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“Notwithstanding this, CRH will remain incorporated, headquartered and tax resident in Ireland. We will also maintain a standard listing on the London Stock Exchange. While we would have preferred to maintain our Euronext listing, it is clear that this would not be compatible with our goal of achieving a US equity index inclusion.”
While Mr Mintern did not say what index CRH is targeting, market sources said that the S&P 500 is the obvious aim. The company will be forced to leave the FTSE 100, however, as it moves from a primary to standard listing in London.
If CRH, with a €31.8 billion market value that accounts for almost 22 per cent of the capitalisation of the Iseq 20 index, were to become a member of the S&P 500, it would force investors that track the widely followed US index to buy shares in the company.
The hope is that the group would also trade at a premium relative to profits by being listed in the US, where companies are traditionally valued on higher earnings multiples compared to Europe.
However, CRH’s departure would be a seminal moment for the Irish market, where it routinely is the most traded stock by value. CRH was formed in 1970 through the merger of the already publicly quoted Irish Cement (which floated in 1936) and Roadstone companies.
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Mainstream stockbrokers, who make average commissions of 0.08-0.12 percentage points (8-12 basis points) of the value of trades in CRH, have ceded much of the trading activity in recent years in the large-cap company to so-called algorithmic trading platforms, where charges are at low single-digit basis points, according to market sources.
As CRH will continue to be domiciled in the Republic, ordinary Irish shareholders will continue to face Irish dividends withholding tax, levied at a rate of 25 per cent. A 1 per cent stamp duty on share trading in Irish companies would also continue to apply for directly held CRH stock.
A spokeswoman for Euronext said it “would be disappointed to see any company leave our markets”, but declined to comment on CRH.
“A core focus for us remains working closely with the broader equity markets ecosystem to deliver a more favourable market environment to support the growth and funding of Irish companies and incentivise more companies to IPO in the future,” she added.
Marked progress
Mr Mintern said CRH was continuing to engage with shareholders regarding its recommendation, announced a month ago, to establish a primary stock exchange listing in the US.
“The engagement is progressing well to date, with broad support being expressed by shareholders. We will formally update the market as part of our trading statement on April 26th in advance of our agm,” he said, referring to the company’s annual general meeting.
Flutter Entertainment is also looking at taking on a US stock market listing, fuelling speculation that it may follow CRH in moving its primary quotation to New York.
Meanwhile, a triple whammy over the past two decades of Irish pension funds being pressed to lower their exposure to Irish equities, foreign takeovers of the main local investment players, and a shift by the industry from active stock-picking to passive investment, has conspired to make initial public offerings less attractive.
Only three companies — Uniphar, Corre Energy, and HealthBeacon — have floated in Dublin in the past four years.
