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UPDATE 2-CRH to exit distribution business in $1.9 bln Blackstone deal

By Pushkala Aripaka

* CRH put the unit on review last year

* To use proceeds for further acquisitions, share buyback

* Transaction value is attractive - JPM analysts (Recasts, adds analysts comments, industry background)

By Pushkala Aripaka

July 16 (Reuters) - Irish building materials supplier CRH is selling its underperforming European distribution unit to Blackstone-backed private equity funds for 1.64 billion euros ($1.85 billion), including net debt.

With the sale, the Dublin-based company, which provides cement, asphalt and other building materials, would completely exit the distribution business as it tries to improve core profit margins.

It put the European distribution arm, which operates in Germany, France, Switzerland and the Benelux, under strategic review last year and in April hired Bank of America to launch a sale.

Sources had told Reuters it had drawn interest from buyout funds including Advent, Lone Star and CVC.

JP Morgan analysts said at about 10.6 times earnings before interest, tax, depreciation and amortisation (EBITDA), the transaction value was attractive and would help reduce CRH's overall leverage. Its net debt as a share of total equity rose to 42% in 2018 from 39% in 2017.

CRH, which employs about 90,000 people in more than 30 countries, said it would use the proceeds from the sale for further acquisitions and for its ongoing share buyback program.

Over the last few years, CRH has been selling businesses that have not been delivering and buying attractive ones.

While the company's overall core earnings rose 7% to 3.3 billion euros last year, they fell 1% for the European distribution unit.

In 2017, the Irish firm sold its U.S. distribution business, Allied Building Products, to Beacon Roofing Supply for $2.6 billion in cash and used the proceeds to fund the 3 billion euro purchase of Ash Grove Cement in 2018.

Jefferies analysts said though the deal was at a lower multiple than what CRH had gained for the disposal of the U.S. business, it was still at the top end of recent deals in the sector in Europe.

CRH's peers have also been looking to shed non-core assets to contain rising costs. The world's largest cement maker LafargeHolcim recently sold operations in the Philippines, Malaysia, Singapore and Indonesia, while Saint Gobain put its German building materials business Raab Karcher on the block last year.

The deal with Blackstone includes additional consideration of up to 50 million euros, which CRH would receive on completion of certain conditions, the company said.

($1 = 0.8882 euros) (Reporting by Pushkala Aripaka and Justin George Varghese in Bengaluru; Editing by Arun Koyyur and Emelia Sithole-Matarise)