CRH Plc fittingly joined its Wall Street peers earlier this year by listing its North American shares on the New York Stock Exchange. That move followed
DON MARSH, EDITOR
CRH Plc fittingly joined its Wall Street peers earlier this year by listing its North American shares on the New York Stock Exchange. That second-quarter move followed the Irish giant’s $350 million acquisition of Houston-based MMI Products, whose concrete reinforcement and hardware production gave its crown jewel, Oldcastle Inc., a new business unit. Bolder, more recent developments have Oldcastle on pace to eclipse $12 billion in sales this year.
The industry has been reminded twice in the third quarter that CRH has deep financial and management resources to strike while the iron is hot. In July, the company announced a $50 million investment in American Cement Co. LLC (ACC), plus a near-term commitment of perhaps $200 million to fund the entity’s 1.2 million-ton-per-year cement plant in Sumterville, Fla. (note page 8). ACC brings Oldcastle Materials into the U.S. cement business, which is led by the four others who accompany CRH in the top five of global heavy building material operators: Cemex, Heidelberg Cement, Holcim and Lafarge. ACC appears more of a move to secure stable material supplies for Florida-entrenched Oldcastle Precast and Oldcastle Architectural than a CRH thrust into powder this side of the Atlantic.
The roughly $600 million behind the MMI and ACC commitments is less than half the amount CRH dropped on Oldcastle’s largest addition to date. Through Oldcastle Materials, CRH closed August 28 on a $1.3 billion deal for Ashland Paving and Construction Inc. (APAC). Kentucky-based seller Ashland Inc. announced in June that discussion of a possible APAC sale would proceed exclusively with Oldcastle Materials. That move is consistent with the buyer’s tendency to avoid bidding wars and pursue transactions where existing management remains. To that end, APAC President Kirk Randolph and key management will continue to oversee operations, renamed APAC Holdings, and report to Oldcastle Materials CEO Mark Towe.
The transaction brings the buyer into at least five states where it had limited or no presence. APAC Holdings’ operations in 14 Midwestern and Southern states include 31 ready mixed, 93 aggregate and 226 asphalt plants. Also a player in road and bridge building and engineering, the company has a payroll of about 9,700 and fleet of 13,000-plus rolling stock. Based on Oldcastle Materials’ 2005 year-end figures and APAC Holdings’ fiscal year 2006 (ending June 30) numbers, the combined entity has upwards of $6.8 billion in sales and shipments of 195 million tons of aggregate, 72 million tons of asphalt, and 9.5 million yd. of ready mixed.
Although the combined figures will show adjustments in sales and shipments when measured on the same fiscal period, Oldcastle Materials has surely reinforced its portfolio and pegged a potential $40 million in annual cost savings by the end of the decade. Prior to the deal, the company had cited number one and number four positions in U.S. asphalt and aggregate production, with annual shipments in those categories now boosted 20 percent and 75 percent, respectively. In ready mixed, where APAC Holdings has plants in mostly smaller markets, Oldcastle Materials gains about 1 million yd. production, bringing it close to 10 million yd. annually and likely a number three U.S. position behind Cemex and Rinker Materials.
CRH launched Oldcastle to grow the company outside Ireland, where it had become a big fish in a small pond. The ability to invest $2 billion in a two-quarter period shows how, in a much bigger pond, that fish can navigate familiar waters and conquer new markets.
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