CRH: Proposed Joint Takeover of Australia-Listed Abri Is Unexpected but Low-Risk

CRH’s proposal to buy 57% of shares in no-moat Australia-listed Adbri for USD 750 million is unexpected. The characteristics of heavy building materials does not lend itself to geographical synergies and CRH has no material business in Australia. However, we view the risks of the deal as relatively low. CRH’s strong financial position will remain intact and its partnership with Barro Group, which already owns 43% of Abri, will provide useful insight into operating in the region. The cash offer in the form of AUD 3.20 per share implies a 41% premium to Adbri’s closing price on Dec. 15, 2023, and a 60% premium to our stand-alone fair value estimate of AUD 2.00 per share. We maintain CRH’s narrow moat rating and $55 (GBP 44) fair value estimate.