CRH has bought Allied Building Products, the third largest US distributor of roofing, exteriors for buildings and insulation products, for $121 million (£75.6 million). This brings to £190 million the amount spent by CRH on acquisitions so far this year.
The latest purchase brings CRH into a new core business in the US. It will be used as a platform for growth", according to Mr Liam O'Mahony, chief executive of Oldcastle, the holding company for CRH's operations in the US.
Allied employs 1,250 people and generated a pre-tax profit of $9.4 million on sales of $429 million in 1995. As CRH has paid a premium on the net assets, goodwill amounts to some $30 million.
The consideration, which includes debt around half the total is on an operating profit multiple of 8.4. CRH, however, has stressed that the consideration reflects the impact of high seasonal working capital.
Sales are expected to rise to $480 million and operating profit to $16.8 million (from $14.4 million) this year. This, said Mr Myles Lee, CRH's general manager finance, should add about lp to earnings per share in a full year.
The group, he said, had had a good trading record, even in the down cycles. Last year saw a standstill period in terms of profits. This, according to Mr Lee, was due to the costs associated with the opening of new branches.
The group, he added, would now familiarise itself with the new core business. The industry is very fragmented, with four companies controlling 18 per cent of the market Allied has 4 per cent so there is a "lot of potential" to do bolt on acquisitions. It has national coverage with 69 branches and will be able to buy bolt on "at keener multiples".
CRH's sales in the US now amount to $1.6 billion, with the new division accounting for 30 per cent. Materials account for 30 per cent, while pre-cast, architectural products and glass account for the remaining 40 per cent. The expansion, he said, would be similar to the development of the other four core businesses in the US, particularly the glass division.
Allied's customers are residential and small to medium sized contractors. Some 60 per cent of sales are in the replacement market which, Mr Lee pointed out, was less cyclical. The remaining sales are in the new construction market. Allied is particularly strong in the east coast, the northwest coast and Rocky Mountain states.
CRH increased its profits by 38 per cent to £160.5 million in 1995. Further strong growth is anticipated for this year.
