CRH hoping to raise €1.24bn in rights issue

BUILDING MATERIALS giant CRH is gearing up to raise almost €1.24 billion from shareholders in the biggest corporate rights issue in the State’s history.

The Irish company intends using much of the cash it raises to fund the purchase of rival businesses, which it believes will come on the market at attractive prices as a result of the building slump in Europe and the US.

CRH intends offering just over 152 million new shares to existing stockholders at €8.40 each on the basis of two new units for every seven ordinary shares held by each qualifying shareholder.

The asking price of €8.40 represents a near 40 per cent discount on the stock’s Monday night closing price of €15.40.

While the group’s share price fell sharply on the news yesterday morning, it actually gained ground in later trade. Its stock was selling at €15.55 by 4.30pm.

The rights issue is designed to raise €1.238 billion, net of costs, which it intends to use to fund new acquisitions and to pay off €500 million in debts.

Chief executive Myles Lee said yesterday its larger rivals were being forced to scale back operations as many of them had large debts a result of borrowing heavily to fund expansion.

At the same time, owners of the smaller businesses that the Irish group typically buys were looking for less in situations where they were selling.

Mr Lee pointed out that the cost of buying businesses was coming down. “We think there is going to be a large pool of opportunities for us, and as a result we are raising capital.”

The company intends extending the maturity – the repayment dates – on €670 million of its debt, which is due next year. This combined with the remaining €738 million from the fund raising will give it the cash it needs to fund any purchases.

Mr Lee said yesterday that CRH’s position was stronger than most of its rivals.

His colleague, finance director Glen Culpepper, said it had debts of €7 billion, €4.2 billion in bonds and the rest in direct bank borrowings.

He said in 2008 its net debts of €6.1 billion were 2.3 times its earnings before interest, tax and write-offs of €2.66 billion, which was well within the terms agreed with its banks, which allow net borrowings to be 3.5 times earnings.

Last year the group generated €571 million in cash after a €1 billion development spend, and returning €69 million in dividends to its shareholders.

Overall, CRH yesterday reported that sales were flat in 2008 at €20.9 billion. Operating profits fell 7 per cent to €1.8 billion, and profits before tax were off 14 per cent at €1.6 billion.

The group’s basic earnings per share were 233.1 cent, a fall of 11 per cent on 2007.

The group intends increasing its dividend payment by 1.5 per cent to 69 cent a-share.

Mr Lee said yesterday that the group was committed to a “progressive dividend policy” because it had large numbers of long-term investors.