Graham pays pounds 55.4m for Erith

Graham, the builders' merchant, has made an agreed pounds 55.4m bid for competitor Erith in a move expected to signal the start of widespread rationalisation of the builders' merchants sector.

If it goes through, the deal will make Bryan Castledine, Erith's chairman and chief executive, a millionaire. He holds 860,000 shares which under the offer are worth pounds 1.09 each, or pounds 937,000, if he takes Graham shares. If he opts for the full cash alternative, the shares are worth pounds 1.04 each.

Mr Castledine has been granted a further 235,000 share options which, at pounds 1.09, are showing a total profit of pounds 100,960.

The extended Erith family, which owns 20 per cent of the company, stands to make pounds 11m. Erith family members have so far given irrevocable undertakings to sell 13 per cent of Erith shares.

The company has been a family-run business since it began in 1847. The family connection will continue, as Bob Erith, the deputy chairman, is joining the Graham board, as is Mr Castledine.

Shrinking margins are making life difficult for builders' merchants who are unable to pass on to their customers, mainly house-builders, the higher prices being charged by raw-material suppliers.

Graham said that the only way out of the profit squeeze was to become bigger and to use the increased market clout to force supplier prices back down.

Ian Mills, Graham's chief executive, said: "Our customers are experiencing negative inflation while our suppliers are passing on positive inflation. As night follows day, this is going to lead to rationalisation in the industry."

The deal will make Graham the second-biggest builders' merchant, just behind Wolseley. The company expects to see benefits from economies of scale in distribution.

Mr Mills added: "There is also a good geographical fit between the companies. Erith are based in the South-east, where we are thinly represented."

Scott Fulton, an analyst at Smith New Court, said: "The top five builders' merchants account for 30 per cent of the market, but there are hundreds of other smaller companies which can usefully be assimilated.

"It is inevitable the merchants will consolidate," he added.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific