CRH in the box seat to win control of Adbri

Ireland-based building materials company CRH now looks likely to fulfil its decade-long aspiration of gaining a meaningful presence in the Australian market.

Executives of building materials provider Boral seriously weighed an acquisition in the past of takeover target Adbri, say sources.

However, Boral’s majority owner, billionaire Kerry Stokes, blocked plans to buy the producer of products such as concrete, lime, cement and aggregates due to his adversity towards involving himself in mergers and acquisitions.

Seven Group, of which the Stokes family are majority owners, gained control of Boral by initially buying a stake, creeping up the register then launching a low-ball takeover bid in 2021, gaining control with a 70 per cent holding.

The company’s shares are now soaring – trading at close to 30 times net profit – so it would have been a good time to put its valuable scrip to work for a deal.

But Ireland-based building materials company CRH now looks likely to fulfil its decade-long aspiration of gaining a meaningful presence in the Australian market, launching a $3.20 per share offer for Adbri in December with backing from the 43 per cent shareholder Barro Group that values the company at $2.1bn.

While Adbri is yet to give its view, the deal looks set to succeed, with Barro known to be concerned about the group’s lagging share price for at least 18 months. The offer was a 41 per cent premium to Adbri’s share price on December 15.

CRH has exclusive due diligence until February 28.

It’s been a long-time coming for CRH, with the global powerhouse initially surfacing in Australia back in 2014 when it was tipped to be considering a deal to buy the Australian assets out of the $US50bn global merger between Lafarge and Holcim that needed to be offloaded to appease regulators.

It has also looked at the building materials empire of the late Len Buckeridge, BGC, and Boral in 2020, and sources say more acquisitions are on the way.

One obvious candidate is BGC’s concrete, quarry and cement, with its clinker mill likely to be appealing, and a more ambitious plan could be a play for Boral at a later stage.

However, the Australian Competition and Consumer Commission is likely to have something to say on BGC, because the other major clinker mill in Western Australia is owned by Adbri.

Another target could be Queensland-based construction cement producer Wagners.

Wagners has underperformed since it listed in 2017, but with its founding family owning close to half of the business any deal would need its blessing.

Boral tried buying Adbri in 2004, but at that time it was blocked by the ACCC. Now the market is different, with independent operators turning up on the east coast and Cement Australia, owned by Hanson and Holcim, a major force.

Analysts say the acquisition by CRH makes sense and it’s the right company to take Adbri forward. In the 1990s, CRH was a well-established building materials company that became a powerhouse. It snapped up $US6.5bn of assets from Lafarge in 2015 following the merger with Holcim that took it to the next level, becoming the third-largest building materials supplier by market value internationally.

It has the expertise and technology, with its CEO Albert Manifold highly regarded, to boost Adbri performance.

It also shifted is primary listing to the US last year from London, where it will remain listed, after that had earlier been shifted from Dublin, where it has delisted.

Adbri shares were worth more than $6 in 2018 but it has not traded above $3.20 since 2022.

While carrying out due diligence one area that CRH will be paying attention to is how the closure of Kwinana Alumina Refinery in Western Australia will impact the business, with it not seen as a favourable move for the lime industry and Adbri is the country’s largest lime manufacturer.

But as in every deal, whether it gets across the line will come down to price.