Bain Capital has reportedly agreed to buy four divisions from the construction product company CRH. The deal is expected to be worth £414 million and it includes one of Britain’s oldest brick companies.
Details of the Deal
The Guardian reported on Monday afternoon that the US-based private equity firm has closed the deal with CRH. The firm is paying the construction company £295 million in cash, although the total worth of the deal is expected to rise to £414 million. This is due to Bain Capital taking over certain debt and pension liabilities, according to Building.co.uk.
Furthermore, The Telegraph speculated the whole division was initially receiving interest from potential buyers, but it is understood now that CRH is going to hold on to some aspects of its business. These include its continental European brick business. The buyout is subject to regulatory approval, but reports are expecting it to be completed in the first half of 2015.
One of Britain’s Oldest Brick Companies
One of the four divisions is Ibstock, which is one of Britain’s oldest brick companies. The Telegraph reported the company has roots all the way back in 1899 and it currently employs nearly 2,000 people. CRH acquired the company in 1999. The recent financial crisis hit the company hard, resulting in layoffs and closures. But it has recently been fairing much better. The company generated £16 million in pre-tax profits in 2013.
The company has been enjoying a growth spur in recent years, after a difficult period after the financial crisis. The Financial Times stated the company is “one of Europe’s biggest building materials companies, and has enjoyed a renaissance thanks to the strengthening upturn in the US and UK economies of late, even as its European operations continue to struggle.”
Furthermore, Ibstock has been increasing its production after the recent surge in the UK housing market. The Guardian wrote the company is expecting to produce 200 million more bricks this year compared to its last year production numbers.
CRH Hopes to Generate More Growth Through Acquisitions
For CRH, the most recent deal is part of its broader strategy to generate more growth through acquisitions. In another Financial Times report, the company’s chief executive, Albert Manifold, commented the deal by saying,
“We see expanding our footprint as a tried and tested means of harnessing growth. We first invested in these parts of our business 15 years ago and no longer see them as core components of our growth strategy, given these are businesses of scale that require continual investment. However they are clearly extremely appealing in other people’s eyes.”
For Bain Capital, the deal is another acquisition of a UK-based company. The private equity firm, which has around £80 billion assets under control, has a stake in companies such as Brakes and Securitas Direct. Bloomberg has hinted the company might also be looking into buying assets from cement companies Lafarge and Holcim. As the deal is not yet finalised, it remains to be seen whether the details will change in the coming months.