Wolseley taps investors for £655m to cut debts

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The Independent Online

Chip Hornsby, the new chief executive of plumbing and building supplier Wolseley, unveiled a share placing yesterday to bolster the company's acquisition war chest.

The world's largest distributor of plumbing and heating products placed 59.5 million new shares, or just under 10 per cent of outstanding shares, at £11 apiece to raise £655m. The bulk of that, £400m, has been earmarked to fund further acquisitions as the company continues to bulk up. The remainder will be used to pay off borrowings related to the £1.35bn takeover of builders' merchant DT Group, the biggest deal in the Wolseley's history which was funded entirely from debt.

Yesterday was the 45th day in office for Mr Hornsby, who succeeded fellow American Charles Banks as chief executive and previously headed up the North American operations. Mr Hornsby said the company's appetite for acquisitions was undiminished after spending more than £900m buying up more than 50 smaller businesses in the financial year to the end of July. He estimated the building materials markets to be worth £700bn in North America and Europe, of which Wolseley controls less than 3 per cent. He said: "Even with our leading role we're barely scratching the surface."

Wolseley unveiled annual profits before tax and amortisation of £817m, an increase of 19 per cent on last year. Revenues climbed 23 per cent to £14.2bn.

The shares, which closed down 70p at £10.94 following the placing, have come under pressure recently as signs of a slowdown in the US housing market intensify, following a series of interest rises. The company generates 65 per cent of its sales across the Atlantic. Data has shown a surge in the number of homes for sale and dwindling demand, suggesting the US housing market is crumbling. But Mr Hornsby said home repairs and maintenance, as well as the industrial and commercial markets, should continue to grow.

Wolseley has invested in a distribution network in Britain where the building materials market has been flat for some time but is now showing signs of picking up. Mr Hornsby, who spent several weeks travelling in Europe at the start of the year in preparation for the top job, said he was taking a special interest in reviving European operations.