Exclusive: Activist investor Cevian builds stake in Ireland's CRH

By Johannes Hellstrom

STOCKHOLM (Reuters) - Activist investor Cevian Capital has built a stake in Ireland's CRH to become the heavy materials and building products group's second-largest owner, Cevian managing partner Christer Gardell told Reuters.

CRH, which makes cement, aggregates and asphalt among a wide range of building products, is Cevian's second disclosed new investment since stock markets turned bearish in the second half of 2018, having announced a 2.3 percent holding in banking group Nordea in December.

"We have actively taken advantage of the recent market turbulence to make a number of new investments and add to some existing holdings," Gardell said.

"The group has many strong positions in attractive markets and we are convinced that CRH's assets could become significantly more valuable."

CRH is the world's second-biggest building materials supplier by market capitalisation.

Though Gardell declined to specify the exact size of Cevian's holding, a place as its second-biggest individual investor would give it a stake of nearly 3 percent, worth some 600 million euros ($684.5 million), according to CRH ownership data and disclosure notices.

That excludes UBS, which is a custody account representing several different shareholders.

Cevian, Europe's biggest activist investor, has about 13 billion euros under management and owns stakes in blue-chips such as robotics and automation group ABB, steel-to-elevators company Thyssenkrupp and mobile network equipment maker Ericsson.

VALUE-ENHANCING OPPORTUNITIES

The firm often targets companies with weak profitability and complex structures, providing opportunities to improve returns through measures such as cost-cutting, divestments, spin-offs and management change.

CRH, which posted a 12.5 percent core profit margin in 2017 on sales of more than 25 billion euros, has more than 80,000 staff and strong market positions in Europe and North America, where it is the biggest producer of asphalt for highway construction.

It has been highly acquisitive in recent years, including last year's $3.5 billion purchase of U.S. cement maker Ash Grove and the 6.5 billion euro purchase of assets that Lafarge and Holcim were obliged to sell ahead of their 2015 merger.

CRH's profitability lags that of rivals LafargeHolcim and HeidelbergCement, which had margins of 22.9 percent and 19.1 percent respectively in 2017.

In an effort to improve shareholder returns, CRH last year initiated a buyback programme and started a strategic review of its European distribution business.

Cevian's Gardell declined to say whether Cevian would push for structural moves such as divestments or spin-offs.

"We prefer to communicate with the company in a more constructive way," he said.

Gardell would not comment on whether Cevian planned to increase its holding further or whether it would seek a seat on CRH's board of directors.

CRH has a market capitalisation of 21 billion euros, but its share price has slid by 18 percent over the past two years, representing a far steeper drop than the 6 percent decline for the STOXX Europe 600 Construction and Materials Index, and 1 percent fall for the blue-chip FTSE 100.

($1 = 0.8766 euros)

(Reporting by Johannes Hellstrom; Editing by Georgina Prodhan and David Goodman)