CRH has beaten off strong international competition to buy a 49 per cent stake in Portugal's second-largest cement producer, Secil, for €372 million in cash.
CRH is acquiring the stake from Portuguese-listed company Semapa, which will retain a 51 per cent holding in the cement firm.
Under the terms of the deal, the two companies will have joint management control of Secil, which holds close to 40 per cent of the Portuguese cement market.
CRH reportedly competed for the holding with companies from Italy and Brazil.
Demand for building products has suffered in Portugal over the past year amid a decline in construction.
Secil posted operating profits of €69 million last year, down from €117 million in 2002.
The price of CRH's 49 per cent stake is based on a full enterprise value of €900 million, including net debt of €140 million, for Secil.
Analysts at Davy said this meant CRH was buying Secil on a higher valuation metric than is usual for the company, particularly since the Portuguese construction market is depressed.
Public investment has been limited in Portugal over the past few years as the government has attempted to obey the strict budgetary rules governing Economic and Monetary Union.
CRH finance director Mr Myles Lee said the company was expecting a pick-up to emerge around the beginning of this year, as Portugal continues to benefit from EU structural funds and begins to enter an election cycle.
He said a conservative estimate would see "moderate uptick" that would put Secil back at 2002 profit levels by 2006.
"It's a very well-positioned business."
NCB said profits at the 2002 level would add about 4 per cent to CRH's annual profits, while a maintenance of last year's performance would contribute an additional 2 per cent.
The transaction will also give CRH a presence in North Africa through Secil's cement production business in Tunisia. CRH has, in the past, been unsuccessful in its attempts to enter the region, most notably through a failed deal in Egypt.
Secil holds about 17 per cent of the Tunisian cement market, although the country only makes a small contribution to the group's overall profits, which are concentrated in Portugal.
Secil also has operations in Lebanon and has a management contract in Angola, a former Portuguese colony.
The deal is due to close by the middle of this year, subject to regulatory approval. CRH is not expected to face competition concerns in the purchase since its only involvement in Portugal to date has been a DIY joint venture with a supermarket chain.
Shares in CRH fell 12 cents to €16.50 in a weak market yesterday.
