Private Equity Firm KKR in Talks with CRH Over Tarmac


February 3, 2015

The Irish company CRH has confirmed it is currently talking with private equity firm KKR about a possible sale of Tarmac, an asset the company just acquired in a mega deal. CRH just announced its huge £4.9 billion deal to acquire assets from Lafarge and Holcim, with the companies needing to shed off assets in order to complete their own merger.


CRH Becomes a Big Player
The Irish buildings material company announced on Monday it has agreed to pay €6.5 billion to purchase assets from the two companies. Lafarge and Holcim are required to sell these specific assets to ensure their planned $40 billion merger will go through later this year.


The deal will see the company become one of the largest building material suppliers in the world, in terms of market value. The company’s chief executive, Albert Manifold, told the Financial Times, “We have waited a decade for a deal like this. We played a long and hard game, as did rival bidders. It was three months of nip and tuck.”


Manifold is referring to the competition with the private equity firm Blackstone. The firm was set to be among the front-runners to buy off the assets, but eventually lost to CRH. Reuters’ sources told CRH was in a better position to Blackstone, as it could integrate the assets into its current business, ensuring the company was able to provide a higher price.


Considering the Sale of Tarmac
One of the assets included in the big deal is the UK company, Tarmac, which has been under Lafarge’s control. The Telegraph reported on Monday afternoon that the company has already started talks with private equity firm KKR on selling Tarmac. Manifold told the newspaper, “What we are talking about with KKR is the UK asset, Tarmac, and a significant amount of cement coming with these assets that are located in the UK”.


CRH is not very interested in the UK; although the company was keen to stress it’s all about limiting the capital allocated in the UK and not directly about market preferences. CRH expects the possible deal to add around 25 pence to its underlying earnings during its first full year of owning the newly acquired assets. Even though the company wasn’t looking to break off the assets, it also wasn’t interested in keeping all of them, such as Tarmac. According to the reports, Lafarge and Holcim weren’t keen to sell the assets in small portions.


The company is hoping to team with the private equity firm and it isn’t necessarily going to sell off the full stake in the Tarmac. Sources close to the deal believe KKR would initially become a co-investor, with the option to gain full stake in Tarmac later on. The firm has been eyeing the company for a while now. Its inclusion in the early talks helped CRH put off some of the regulatory heat from the company’s own deal with Lafarge and Holcim in terms of financing.


The cement and building industry is currently making a comeback in terms of interest from private equity. This is mainly due to the US economy slowly picking up, providing positive news for the building industry.


Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedIn