n the 1970s, Ireland was untested territory for investors in London and the US. The country was considered a business backwater in the eyes of international deal makers, while the Troubles in Northern Ireland did little to add to the appeal of Irish companies hoping to make their way in the world.
Luckily Irish investors liked the CRH story and gave it the solid foundations to become the multi-billion euro (or dollar) business it is today.
It was a simple, tangible business which people could understand. It was in the building supplies trade, buying up ‘mom and pop’ operations in the US and Irish retail investors piled in, as did local institutional investors.
It made those investors a lot of money over the decades and others in the Irish financial services eco-system also did well, in particular its broker Davy.
Last week’s confirmation that CRH is progressing a primary listing in the US has been inevitable for some time and makes sense for several reasons, including the fact that most of its business is done in the US (75pc). It will also reduce potential currency volatility.
And there will be fewer pesky distractions such as headlines about executive pay – CEO Albert Manifold’s pay package set a new ISEQ record last year at €13.9m.
But the move, which is likely to happen in the third quarter of the year, will need some careful management. As the share price inevitably increases to reflect the higher multiples achievable in the US, it may become too rich for European fund managers. Meanwhile, some funds which are focused on FTSE100 companies will need to sell out.
One markets source cautioned that the process needs to be run smoothly to ensure CRH is not made an orphan – stuck between stock exchanges for a time – although CRH will no doubt be very alert to all these potential issues.
The good news for CRH is that as some funds sell out, others will be buying in.
CRH has been trading at 7.9 times Ebitda compared with 14.7 times for Martin Marietta
US shares in general tend to trade at a premium to European stocks. One reason is that it’s a bigger market, with more fund managers chasing fewer quality assets relative to Europe.
US fund managers also place a higher premium on growth. In a recent note, Cantor Fitzgerald analysts highlighted the different multiples US and European construction companies trade at. Given that the CRH is now heavily weighted towards business in the US, it believes its multiples should be more in line with US peers such as Vulcan Materials and Martin Marietta – CRH has been trading at 7.9 times Ebitda compared with 14.7 times for Martin Marietta.
Some observers believe CRH will trade above some of these peers, arguing that it is a better business and that existing US stocks in the sector could suffer as investors switch into CRH.
Estimating the scale of the US money which is likely to move on to the share register is difficult. Many funds in the US will only invest in stock with a primary US listing. Although several big-name funds are already on the CRH share register, that investment is usually coming out of a European fund – so there will still be some movement there as their US cousins move in.
Ferguson, formerly Wolseley moved from the UK to a primary US listing last year and has seen its US investor base grow from around 30pc to over 50pc.
While CRH has said the planned US listing will bring increased commercial and operational opportunities to the company, it will be interesting to watch just where the share price lands.
Hot Irish companies have as much credibility as those coming out of London
As for the ecosystem around equities, the planned move by CRH is the latest instalment of a slow but steady drain on activity.
As for Euronext Dublin, does the next generation of promising Irish companies need an Irish listing in the way that CRH, Kerry and Smurfit once did?
Some in the market feel strongly that an independent Irish stock exchange and a robust ecosystem are essential when it comes to fostering the next generation of blockbuster Irish firms. Local access to capital markets is essential for future success, they believe.
But many corporate insiders now feel hot Irish companies have as much credibility as those coming out of London, particularly in the technology space. The globalisation of finance has meant there are many options for those with global vision and Dublin is unlikely to be their first port of call.
Meanwhile, Irish listing activity has been sluggish for some time. One of the last companies to list on the Euronext was Health Beacon, which debuted at €5.85 in late 2021 and is now languishing around 86c.
Will there be an unexpected new lease of life for the Irish market? At present, it is hard to see where that would come from.