* Ash Grove says unnamed bidder to offer up to $3.8 bln
* Summit Materials submitted bid on Thursday - source
* Ash Grove had agreed $3.5 bln sale to CRH last month
* Fast-growing Summit run by former CRH executives (Adds Summit Materials statement, updates share price)
By Padraic Halpin and Pamela Barbaglia
DUBLIN/LONDON, Oct 6 (Reuters) - Summit Materials, a U.S. construction firm set up by former CRH executives, has made a rival offer for Ash Grove Cement, which CRH has agreed to pay $3.5 billion for, a source said.
Ash Grove said on Friday it had received a bid valued at $3.7-$3.8 billion which it expects to result in a better offer to the deal struck last month with CRH, the world's third-largest building materials supplier.
A source familiar with the matter said the unnamed bidder was Summit and it had submitted its bid on Thursday. The offer is being considered by Ash Grove's board, the source added.
Summit said it does not comment on market rumours or speculation. Ireland's CRH said that its proposal remains in place, subject to approval from Ash Grove shareholders.
Shares in CRH were down 2.1 percent at 30.85 euros at 1500 GMT while Summit was 2.0 percent lower at $32.00.
Ash Grove has set a meeting on Nov. 1 for shareholders to vote on the agreement with CRH, which its board unanimously approved last month, but has extended the period during which it can look for other potential buyers to Oct. 20, the cement company said in a statement.
Prior to setting up fast-growing Summit in 2009, the Denver materials group's chief executive Thomas Hill headed up CRH's North American arm and went on to poach a number of other senior U.S.-based CRH executives.
Summit's bid would surpass its own value of $3.65 billion. CRH, which has a market capitalisation of $26.3 billion and said last month that it had around 5 billion euros available to spend on acquisitions over the next 18-24 months, made an all-cash bid.
CRH is also Ash Grove's largest customer and would be owed a $131 million termination fee if the Kansas-based company sells to another party.
"Summit Materials' opportunistic offer of an Ash Grove merger will likely see investors decide between a cash offer at a 60 percent premium or a merger that gives no certainty to a cash exit price for large Ash Grove investors," said Darren McKinley, analyst at Dublin-based Merrion Stockbrokers.
"Given CRH's position as Ash Grove's largest customer, they are well placed to determine whether a higher offer makes sense or whether to let Ash Grove shareholders decide whether they want cash in hand now or to merge with a company that currently doesn't pay a dividend."
Additional reporting by Kanishka Singh and Conor Humphries; Editing by Alexander Smith and Elaine Hardcastle