Bottom Line: Unfair to Wolseley

THE BIGGEST surprise of Wolseley's decision to expand its photographic products division is that it was in the business in the first place.

But the acquisition of Calumet, the US distributor of its existing professional camera equipment manufacturer, is a logical, if peripheral, addition.

Paying pounds 28.2m for underlying operating profits of about pounds 4m looks a good price and the deal provides a useful element of vertical integration.

The market's reaction to yesterday's announcement of a pounds 55m placing at 748p to fund the deal, and then some, was telling. A fall in the share price from 779p to 764p followed a 20 per cent drop since the March peak at 975p.

Nevertheless, acquisitions in the past have served Wolseley shareholders well, as subscribers to the share issues of the past two years at 400p, 565p and 632p respectively will testify.

With profits expected to reach pounds 190m in the year to July, the shares trade on an annualised p/e of 15 for 1994. That is pricier than the market but cheaper than the other builders, which seems unfair for one of the sector's best companies. Good value.