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From Staff Reports
Dublin-based CRH PLC (CRH) is eyeing a possible $3.5 billion to $4.5 billion acquisition of Cemex SAB's (CX) concrete plants, cement division and pipe-making unit, the companies announced yesterday (Monday).
For CRH, the world's second-biggest maker of building materials, it's all about timing. The majority of the assets that the Monterrey, Mexico-based Cemex is unloading are operations and plants in Florida and Arizona that the U.S. Department of Justice required it to sell as a result of its acquisition of Rinker Group Ltd.
Also in the mix of negotiations is Cemex's concrete pipe business, and related operations, across the country, as well as related assets in Spain, Austria and Hungary.
CRH seems to be anticipating skepticism from its shareholders, who have seen the company's stock slide almost 25% in the past three months. It reassured investors that CRH is willing and able to make the purchases even as the credit crunch is torching the building and housing sectors.
"CRH has sufficient balance sheet capacity to debt-finance any transaction that might take place," the company said in a statement.
Analysts have mixed reactions.
Bloomberg News reports that Moody's Investors Service and Standard & Poor's both may downgrade their ratings on CRH, because the company is taking on too much debt at a critical time.
"The deal is strategically sensible and tactically the timing is correct," John Mattimoe, an analyst at Merrion Stockbrokers in Dublin, told Bloomberg. "But some investors aren't happy with the company increasing its debt during the current credit market volatility and the increased risk exposure to the U.S."
He added that he rates CRH shares as a "buy."