Wolseley plots sale of tool hire business
Proposed sale of Brandon Hire could be the first step in a revamp of the building materials group's UK operations
Sunday 04 July 2010
Wolseley has kicked-off the restructuring of its UK arm by putting its tool hire business up for sale.
The FTSE 100 building products giant is looking to cut its net debt, which stood at nearly £1.1bn at the end of April, and asset sales are an option for divisions that do not meet its turnaround strategy.
BDO Stoy Hayward is understood to have been appointed to sell Brandon Hire, which Wolseley bought in a 212p-a-share deal four years ago. One industry expert said that although Wolseley expanded the business by merging Brandon with its own hire operations, it would likely "get less than half" what it paid in 2006.
The tool hire market has been badly hit by the housing downturn, one of the key collapses that caused the recession. Several construction equipment businesses have changed hands recently, including Hewden Stuart, which was bought by Sun European Partners from its Canadian parent, Finning International, in a £110.2m deal.
Private equity houses Cerberus, RJD Partners, Rutland Partners and turnaround group Endless are believed to be considering bids for Brandon. The deadline for first round bids is thought to be later this month.
In March, Wolseley's chief executive, Ian Meakins, announced plans for the future of the company, with 19 of 41 operating businesses placed in a pot called "performance builders". These have to improve their financial performance quickly if they are not to be sold by the group.
The company did not name the "non-core" subsidiaries – though builders' merchants chain Build Center is on the list – so that employees did not worry about their futures. The 19 businesses account for only 5 per cent of profit even though they make up 27 per cent of sales.
Wolseley has since appointed Steve Ashmore as UK managing director in an internal promotion. Mr Ashmore is thought to be looking at the fuinances of a number of UK assets, such as wholesaler Electric Center, that are not part of the core pipes, plumbing, climate control and ventilation businesses.
A sector analyst said: "Brandon is certainly non-core for Wolseley. It just doesn't fit into the scheme of things." A source close to Wolseley added: "Ashmore's team is taking a dispassionate, cold, hard look at these non-core businesses that need to turn around their financial performances."
It has been suggested that BDO has been given a number of other mandates by Wolseley, but the source denied this claim.
The group was in the news last week as activist investor Cevian Capital revealed it had nearly 14.7 million shares (5.2 per cent) in Wolseley.
However, Cevian partner Marcus Alexanderson tried to reassure the market that it was not looking to make trouble, that it backed Wolseley's strategy and was impressed by its businesses.
Wolseley's share price closed at 1322p on Friday, up 1.93 per cent on start of day's trading. This means that the market values the company at nearly £3.7bn.
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