Wolseley to raise £1bn by placing and rights issue
Company wants partner for US Stock business
Saturday 07 March 2009
Wolseley, the building supplies company, unveiled its much-anticipated restructuring plan yesterday, including a £1bn capital raising effort.
The group has struggled to reduce its £2.5bn debt as housing markets on both side of the Atlantic have nosedived.
To strengthen its capital base, the company is placing £270m of new shares with existing investors at 120p each, or a 27 per cent discount on Thursday's closing price. After a recapitalistion, a further £781m will be raised through a heavily discounted 11-for-five rights issue and the company has also renegotiated a €1bn (£890m) two-year debt facility.
Chip Hornsby, the chief executive, said: "Our markets have been hit hard in recent months and in response we have continued to take prompt and decisive action to reduce both costs and debt. Following the completion of the comprehensive financial restructuring, the balance sheet will be substantially strengthened."
Wolseley's strategy also includes plans to find a joint venture partner for its Stock business in the US, which accounts for 10 per cent of group revenues, or to sell out by August if a deal cannot be found. The Central and Eastern European businesses are also under review, so the group can concentrate on its core US plumbing and heating business and Western European operations.
Despite the drastic measures, investors remain wary. The group's stock, which has lost more than 70 per cent in the last 12 months, dropped to a 19-year low, closing down 15 per cent at 140.4p. The shares had already dropped by 8.7 per cent on Thursday, after Wolseley was forced by persistent rumours to acknowledge a rights issue was imminent.
A straightforward rights issue would instill greater confidence, according to City experts. "The complex structure reflects the fact that there have been too many rights issues in the market, and also hints that Wolseley was struggling to find sub-underwriters from its normal banks so had to go to its investors," one analyst said.
Wolseley has already cut 17,000 jobs and closed 713 branches since August 2007 and existing cost-saving plans are expected to deliver £572m per year. Financial results, published yesterday, emphasise the scale of the difficulties facing the business. Wolseley's revenues rose 3.2 per cent to £8.3bn in the six months to January, but trading profits dropped by a whopping 43 per cent to £182m, leaving an operating loss before tax of £880m after exceptional items including a £262m impairment charge. The group did not pay a dividend last year, and will not pay out at the half-year either.
The company's board issued bullish statements yesterday about the efficacy of the planned restructuring in meeting the challenges of the current environment. But further actions may still be necessary, if markets deteriorate even further than anticipated, the company said.
- 1 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
- 3 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
- 4 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 5 Isis publicly behead man in Syrian town square for 'insulting Allah' as he screams for help
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Sir David Attenborough interview: The one question about life that still baffles him
Isis publicly behead man in Syrian town square for 'insulting Allah' as he screams for help
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
iJobs Money & Business
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...