Harrisons in talks to sell building merchants business

Harrisons & Crosfield, the beleaguered building and animal feed conglomerate in the throes of a restructuring programme, admitted yesterday it was in discussions to sell its building merchants business to the rival Meyer group. Andrew Yates finds the deal could raise much-needed funds for the ailing group.

Meyer International, the timber importer and builders merchants, is holding talks with Harrisons & Crosfield about buying its building merchants business for more than pounds 300m. A deal would bring together the Jewson and Harcros chains and create the biggest building merchants business in the UK.

Bill Turcan, chief executive of Harrisons & Crosfield, said: "We are in talks with Meyer but I cannot say anything further at the moment. Our strategic review is on target to be completed by the end of October. Our new chairman and I are looking at a range of options and we will announce our decision very shortly."

Jonathan Fry, former head of Burmah Castrol, joined Harrisons as chairman to oversee the restructuring of the group.

However Mr Turcan refused to comment further on the outcome of the strategic review or whether the sale of Harcros could be the first of a string of disposals. It is also unclear whether Harrisons is holding exclusive talks with Meyer.Some observers believe rival builders merchants could also be interested in Harcros.

Analysts reckon the disposal proceeds could pave the way for a special dividend payout. One analyst said: "Harrisons & Crosfield has been a poor performer. It is about time they started to do something about it and give something back to shareholders."

Under fire from institutional shareholders after a dire share price run, Harrisons has launched a strategic review of its business empire. Most analysts believe the group will be broken up, achieved through trade sales or flotations of businesses. The group is also rumoured to be close to selling BOCM Pauls, its animal feed business, for around pounds 85m to George Paul, the group's former chairman.

A deal with Meyer would see Jewson's 211 outlets married with Harcros's 200 stores. Meyer would then control around one-fifth of the UK building materials market.

Meyer said the deal would be earnings enhancing in the first full year. It is thought to be looking to finance the deal via a rights issue.

Harrisons recently announced a slump in profits from pounds 64m to pounds 38.6m for the six months to June. However Harcros improved operating profits to pounds 9.7m from pounds 5m.

Separately Harrisons announced it was selling Moore's Lumber and Building Supplies, its US builders merchant, for $63m (pounds 39m) to MLBS, a venture capital-backed takeover vehicle. The group has made a loss of $62m (pounds 38m) on the deal.

Harrisons has been hit by intense competition in the US and has been forced to withdraw from the market.