CRH Wields $1.9 Billion for M&A as U.S. Housing Rebounds

CRH Wields $1.9 Billion in M&A Capacity as U.S. Housing Rebounds
“We feel the housing market is finally beginning to lift off and we expect it to continue, barring any fiscal-cliff debacle,” Myles Lee, chief executive officer of CRH Plc, said. Photographer: Scott Eells/Bloomberg

CRH Plc, the world’s second-largest maker of construction materials, has the capacity for as much as $1.9 billion of acquisitions in the next 18 months as the U.S. housing market rebounds, Chief Executive Officer Myles Lee said.

“We see quite a lot of opportunities coming across our desks at the moment,” Lee said in an interview at Bloomberg’s headquarters in New York. “We still have quite a bit of firepower in our balance sheet.”

CRH has completed about 400 million euros ($513 million) of takeovers this year and may boost spending to between 1 billion and 1.5 billion euros if opportunities with “good value” emerge, Lee said. The potential for those is growing with “some sellers moderating their expectations and our own sense of confidence in markets such as the U.S. coming back,” he said.

Acquisitions by Dublin-based CRH peaked in 2006, when it spent 2.3 billion euros on deals, the company said this week in a presentation to investors. That included the $1.28 billion acquisition of Ashland Inc.’s road-paving unit in the company’s largest-ever purchase, according to data compiled by Bloomberg.

CRH reduced spending on acquisitions, which hasn’t exceeded 1 billion euros annually since 2008, after credit markets froze and the global economy stalled in the wake of Lehman Brothers Holdings Inc.’s collapse.

Right Valuations

Deciding whether and how much to re-accelerate the pace of deals now is “all about returns, and if we see the opportunities that make sense in terms of our business footprint and if we can get the valuations right in terms of the negotiating process,” Lee said.

CRH shares have dropped 9.5 percent to 13.90 euros in Dublin so far in 2012, following declines in four of the past five years as the economic slump eroded construction demand. That compares with a 5.7 percent gain in the 21-company Stoxx 600 Construction & Materials Index.

The company predicts earnings before interest, taxes, depreciation and amortization this year of 1.6 billion euros, trailing 2011’s results, as disruptions stemming from Hurricane Sandy’s impact on the east coast of the U.S. hurt sales, executives said in a presentation to investors.

The storm may improve 2013 results, boosting demand for construction materials in hard-hit areas including New York and New Jersey, where CRH has a strong presence, Lee said in the interview yesterday.

U.S. Housing

The company may also benefit as the housing market in the U.S. recovers, Lee said. Americas sales accounted for 45 percent of CRH’s revenue last year, according to data compiled by Bloomberg.

Housing starts rose 3.6 percent last month to an 894,000 annual rate, the fastest since July 2008 and exceeding all estimates in a Bloomberg survey, Commerce Department figures showed yesterday in Washington.

“We feel the housing market is finally beginning to lift off and we expect it to continue, barring any fiscal-cliff debacle,” Lee said.

Cie. de Saint-Gobain SA is the world’s largest maker of construction materials by revenue.

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