A buyer’s market?

Everything you want in life has a price connected to it. There’s a price to pay if you want to make things better, a price to pay just for leaving things as they are,

So we finally know the price that Travis Perkins has put upon the BSS business. £557m is a lot of money. But then they are buying a lot of business. It represents an uplift of 37% on the share price the day before the announcement was made which is a pretty good deal in my book. But then I’d say it’s a pretty good deal for both parties.

Around 35% of BSS shareholders have either made irrevocable undertakings or issued letters of intent – said yes, in other words – to the takeover. Which means barring any unforeseen circumstances, by Christmas, Travis Perkins will have leap-frogged Wolseley to become the largest mixed builders merchant group in the country.

I’ve written before (here) about why I think this is a great move for both parties as it brings so many complementary businesses under one umbrella and, as it’s coming in at 10 times this year’s earnings, should prove a juicy little long term ROI.

Damien Reece, writing in today’s Telegraph here points out that the deal is coming pretty much at the bottom of the construction cycle and that both sides of the deal stand to benefit from the synergies and the consolidation because TP are offering not just cold hard cash but shares as an alternative.

And, of course, there is also the argument that by coming together and being bigger, the two might survive a bit better should we get the dreaded double-dip.

Although, being bigger didn’t stop Wolseley from suffering sore really quite substantial problems in the past two years. The Independent on Sunday has speculated that the group is putting tool hire business Brandon Hire up for sale.

Now at this stage it is just speculation and Wolseley are not confirming or denying anything. It’s fairly certain that there are groups looking seriously at Build Center, so there are bound to be others looking at Brandon and any other parts that are on the list of 19 ‘shape-up or ship-out’ businesses.

I think that the TP/BSS deal will probably have the effect of speeding up the sale of those ‘Performance Builder’ businesses who can’t shape-up enough to be retained as part of the sleeker, more streamlined, more efficient Wolseley ship that CEO Ian Meakins is steering.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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