DAVY VIEW

Investors have long memories when it comes to acquisitions in the cement space, so reaction to the Firestone deal may be mixed. We view it more positively, however, for a number of reasons, including (1) the CEO is delivering on his stated aim to grow into value-added products; (2) the deal further reduces exposure to emerging markets and cement; (3) at 12.6x EBITDA, the group is not massively over-paying for what it is getting; (4) the balance sheet will not be stretched, with FY21 net debt/EBITDA to remain well below 2x; (5) the deal plays strongly into the sustainable construction opportunity; and (6) the market will trust the CEO to integrate and grow the business even if synergy numbers look ambitious (given limited overlap). The stock continues to screen well, and we reiterate our ‘Outperform’ rating.