Wolseley buys DT Group of Denmark for €1.5 bln
Tuesday, July 25, 2006, 12:49
Wolseley Plc, the world's biggest distributor of plumbing and heating equipment, has signed an agreement, conditional only upon regulatory approval, to acquire DT Group (formerly known as Danske Traelast), the Nordic region's leading distributor of building materials, from CVC Capital Partners. Cash consideration of €1,498 million (£1,023 million) representing the equity value of DT Group has been agreed which, including the assumption of net debt as at 30 June of €484 million (£330 million), gives an enterprise value of €1,982 million (£1,353 million), to enter the Nordic region's building-materials market. The acquisition will be financed using debt.
The business operates from approximately 256 locations across the Nordic region (in Denmark, Finland, Sweden and Norway), of which 175 are builders' merchants, 65 are DIY stores and 16 are wholesale outlets. The company has approximately 8,000 employees,
CEO Charlie Banks said today. The region's €30 billion building-materials market remains fragmented, promising further growth opportunities, he said. With the purchase of DT from private equity firm CVC Capital Partners, Wolseley is extending a record pace of acquisitions, taking deals this year to more than £2 billion ($3.7 billion). The Reading, England-based company will assume €484 million in debt as part of the agreement. „It looks a sensible purchase but it's not cheap,” said London-based Bridgewell Securities analyst Howard Seymour, with an overweight rating on the stock. DT may be the final deal made by Banks, who is scheduled to retire at the end of this month. The American CEO has used acquisitions to accelerate Wolseley's growth and expand in the US and across Europe as growth in the U.K. home improvement market slowed. Under his leadership, Wolseley's profit has more than doubled and sales have jumped almost 60%. Takeovers helped boost 11-month profit 20%, Wolseley said on July 17.
The purchase is designed to grab market share in Europe, and there are no plans to cut any jobs. Purchasing power will be enhanced, which will generate some savings, Wolseley said. „It significantly improves our footprint in Europe,” said Banks, who will be replaced by fellow American Chip Hornsby, currently head of North American operations. „We have been looking at the Nordic region for a while.” DT is the largest building-materials suppler in the Nordic region. It's the No. 1 in Denmark, the No. 2 in Sweden and Finland and in the „top cluster” in Norway, the statement said. „I wouldn't classify it as cheap,” Banks said. „We have always said we would make a big acquisition if we found the right fit.”
Wolseley plans to retain DT's management, led by CEO Steen Weirsoe. The 8,000-employee company has annual revenue of € 2.4 billion from sales of products ranging from plumbing pipes to garden equipment. It was founded in 1896 in Aarhus, the biggest city in the Danish peninsula of Jutland. The group moved into Sweden almost a century later.
DT, which owns the Silvan home-improvement chain, was bought by CVC in 2003 for $624 million and it originally planned to own it for four years. CVC is the most active private equity fund in Europe with $7 billion invested in buyout deals, today's statement said. „It's a large deal and some people may be slightly nervous,” Seymour said. „Wolseley will have to work hard to convince them.” The acquisition will be immediately and significantly earnings enhancing from the outset, the company said. The bulk of the U.K. company's acquisitions are smaller, often family owned businesses, which when integrated into the group, benefit from better purchasing terms as well as a broader product range and lower costs. Wolseley traces its roots to 1887, when an Irish emigrant to Australia, Frederick Wolseley, founded the Wolseley Sheep Shearing Machine Co. in Sydney. In 1889 he moved to Birmingham, England, and teamed up with his manager, Herbert Austin, to make motor cars. The company sold the auto business in 1901. Wolseley was advised by Lehman Brothers with UBS Ltd. acting as corporate broker. (Bloomberg, wolseley.com)