CRH: Arcosa Acquisition A Good Strategic Fit For CRH's Connected Portfolio

Research evidence excerpt

CRH: Arcosa Acquisition A Good Strategic Fit For CRH's Connected Portfolio

IdeaM~10% specialty and other end-markets. Of note, Aggregates constitute ~60% of CP

sales and in 2025 Arcosa shipped ~35MT of aggregates volumes. Within Engineered

Structures, the end-market split is roughly 70% Utility & Related Structures and

30% Wind Towers. However, CRH notes that Wind Towers make up less than 10%

of Arcosa's Adj. EBITDA.

Financial Overview: CRH intends to fund the transaction with available cash and

committed debt financing. The deal implies an enterprise value of ~$8.5B, or 11.5x

Adj. EBITDA of $740M (FY26 Adj. EBITDA of ~$565m plus~$175m of run-rate cost

synergies). The ~$175m synergy target equates to ~6.6% of Arcosa’s 2026E revenue

outlook. Before synergies, the implied multiple is approximately 15x on ~$565m of

FY26E Adj. EBITDA. CRH expects pro forma FY26E net debt / Adj. EBITDA of ~2.4x

to normalize toward its ~2.0x long-term average within 12 months of completion,

and CRH reiterated its commitment to maintaining the investment-grade rating it

has held for over 20 years. CRH expects the deal to be accretive to earnings, margin,

and cash flow in the first 12 months post-completion, before one-off transaction

costs. The ~$175m of run-rate cost synergies are expected by year three, per the

company, phased at approximately $60m, $130m, and $175m across years one to

three, and sourced from operational efficiencies (plant performance, logistics and

network optimization), self-supply, SG&A and global procurement scale.

Strategic Fit and Our Two Cents: Although a deal this size may have caught

investors who have grown accustomed to CRH's bolt-ons focused approach by

surprise, we think there is a good strategic fit here. For starters, Arcosa's aggregates