The plumbing and building supplier Wolseley pulled off its biggest acquisition yesterday when it won a hotly contested auction to buy DT Group, Scandinavia's leading builders' merchant, from its private-equity owner CVC Capital for £1.35bn including debt.
Under its American chief executive Charles Banks, who retires next Monday, Wolseley has gobbled up many smaller rivals over the past five years but this deal is by far the largest. The group beat off fierce competition from the French building materials group Saint-Gobain and the private-equity firms Cinven, Bain Capital and BC Partners in a final bid round last week. Wolseley shares closed up 33p at 1,112p.
The group, which was advised by Lehman Brothers, has long been on the lookout for a target in Scandinavia, where it has had no presence. It reckons the €30bn (£20bn) market is ripe for consolidation, with Denmark's DT Group controlling less than 10 per cent. Wolseley supplies building materials, heating and plumbing as well as industrial pipes and fittings and tool hire.
The cash deal will be financed entirely from debt, unlike Wolseley's smaller bolt-on acquisitions which are mostly paid for out of its strong cashflow. The group estimated that DT will generate additional pre-tax earnings of more than 2 per cent of its existing business. Wolseley intends to retain DT's management, led by the chief executive Steen Weirsoe, who will run the business as part of the group's European division.
Mr Banks, who will be succeeded by fellow American Chip Hornsby, the head of the North American operations, said: "This deal clearly fits into the strategy we've been executing over the last five years. We felt we had the capacity to do a big one."
City analysts welcomed the deal as a sensible purchase, albeit not cheap at 10.7 times earnings before interest, tax, depreciation and amortisation. It reduces Wolseley's reliance on the now-slowing US housing market, which generates 30 per cent of group sales. Analysts at Credit Suisse said: "It follows the group's successful model of entering markets with an existing strong business and using this as a platform to expand through bolt-ons and further product diversification. The major deal in Europe will also help balance the scale of US exposure."
Mr Banks has steered the company through a period of rapid growth and has presided over 127 acquisitions - including many smaller family businesses - worth a total £2.1bn since taking the helm five years ago. Since then, Wolseley's profits have more than doubled, with analysts predicting £860m for the current year to 31 July. Mr Banks said he felt he had achieved the two tasks he set himself for his last year in the job: "To finish with a very strong year - to make it the fifth outstanding year for the group - and to have a smooth transition."
Upon his retirement Mr Banks, 65, said he and his wife would move to Virginia, to be closer to their family. He will keep busy, though, with plans to join university boards and to pursue other business interests. He intends to remain on the board of the packaging group Bunzl.Reuse content