READYMIX, the building materials company, has agreed to buy RMC Catherwood for £22.4 million. The acquisition of the company, which operates in Northern Ireland and the Isle of Man, will be partly funded by a placing of new Readymix shares. It represents a major move by Readymix which up to now has been confined to the market in the Republic.

RMC Catherwood is being purchased from British plc, RMC, which owns 74 per cent of Readymix. The deal will have to be approved by the shareholders representing the other 26 per cent holding.

Mr John McNerney Readymix's managing director said the acquisition was initiated bay Readymix. Being part of RMC we were constrained" from expanding into markets in which RMC had a presence. The acquisition should "considerably improve the stability of revenues by balancing the cyclical nature of the individual markets", he said.

Up to now Readymix and RMC Catherwood operated independently and almost exclusively within their own territories. This, Mr McNerney said, precluded the supply of products into "certain natural markets" by both companies.

RMC Catherwood, which operates all of RMC's interests in Northern Ireland buys its cement from Blue Circle while Readymix is suppled by Irish Cement a subsidiary of CRH. Asked if the enlarged group would now be rationalising its supplies, Mr McNerney said he would be looking at "all aspects" but that it was "too early" to comment.

RMC also has a builders supplies business but he reiterated that no decision had been made about an expansion of that business into the Republic.

The interests being acquired are in Northern Ireland, the business and assets of Lowden & Partners in the Isle of Man, the business and certain assets of the Douglas Steam Saw Mill & Timber Company and of the Island Aggregates (including its 50 per cent interest in Island Cement). The acquisition specifically excludes the Scottish division of RMC Catherwood.

The businesses being acquired generated a pre-interest profit of £3.7 million sterling on sales of £48 million last year. This makes it larger than Readymix's sales (£41 million) and a little smaller than Readymix's profits (£4.6 million). Net assets amounted to £15 million, so there will be a large goodwill item which will be written off its reserves.

The deal is earnings enhancing. Earnings per share, on a historic proforma basis, would amount to 11.5p compared with Readymix's 10.4p. Readymix however, would go from a net, cash position of £5 million into at gearing of some 27 per cent reflecting part of the funding for the acquisition.

The consideration is being, mainly funded by a placing of 6.25 million new Readymix shares at 97p per share (the price before the announcement was, 107p) and an open offer, at the same price, on the basis of one for every three held, to raise a further £6 million. RMC will take up only 3.55 million share, much lower than its entitlement of.a 9.8 million shares.

It has, however, agreed to underwrite any of the open offer not taken up.