Building materials group CRH has agreed a deal to sell its European distribution arm to US investment firm Blackstone for €1.64 billion.

Dublin-based CRH has been slimming down its operations by selling businesses that have not been delivering and buying attractive ones in a bid to improve its core profit margins over the next couple of years.

While the whole group saw its core earnings rise by 7% to €3.3 billion last year, the European distribution business was underperforming, with core earnings down 1%. 

The unit being sold comprises CRH's entire general builders merchants businesses in Europe, including its sanitary heating and plumbing business across six countries in Western Europe.

The division reported a pre-tax profit of €124m in 2018. 

"The transaction announced today demonstrates the continued execution of CRH's strategy of creating value for our shareholders through active portfolio management, the efficient allocation of capital and creating a simpler and more focused Group going forward," Albert Manifold, CRH's chief executive said.

"We wish our colleagues in Europe Distribution every success as they enter this new phase of their development," he added. 

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

The company, which provides cement, asphalt and building materials, said the deal with Blackstone includes additional consideration of up to €50m, which CRH would receive on completion of certain conditions. 

Earlier this year, Cevian Capital, an activist investor, revealed it had built a sizeable stake in CRH.

In a note, Davy Stockbrokers said today's sale concludes CRH's exit from its Distribution businesses across the group and will materially reduce net debt. 

"That will allow the group to further flex its financial muscle to complete accretive bolt-on acquisitions and to extend its share buyback programme," the stockbrokers added.

Shares in the company moved higher in Dublin trade today.