Acquisitions return to the market

Let me not to the marriage of true minds
Admit impediments;

Bloody hell. I go AWOL for a week and look what happens.

We’ve only just started to draw breath and think that there might, just, be some more mileage in this old merchanting game now that things seem to be a bit more settled financially when wham! Travis Perkins go and put in a sizeable bid for BSS group.

I did not see that one coming! Probably because most people’s focus has been on Wolseley and Build Center, where the door probably needs to be wedged open to accommodate all the businesses coming in to have a look and think about bidding.

Such a move makes a lot of sense for Travis Perkins. It will give then a far more rounded offering. Their plumbing and heating arm has been growing quietly and steadily for a few years now, bolstered by the acquisitions of City Plumbing Supplies and Jayhard, but they are still a long way behind Wolseley’s dominance of the sector with Plumb Center.

Back-office synergies will bring huge benefits, naturally, especially in sourcing products from overseas. It’s far easier to negotiate good prices from China, say, if you are talking about a container load rather than a few product lines.

TP are renowned for being steady and sure. Gross margins have always been enviable – even in the depths of the recession they managed to keep their heads and not go chasing volumes and ending up on a downward spiral margin-wise. Their focus on margin will probably be good for some of BSS’s businesses where margins have been under sustained attack.

BSS group however, bring quite a lot to the table. Analysts have long been impressed by the group’s entrepreneurial spirit. Then there’s PTS which has been doing quite nicely as the number two in the domestic arena, particularly on its renewable initiatives. There’s also the industrial arm which will add another string to TP’s bow and the recent acquisition of UGS will fit very nicely with TP’s Keyline business. Plus, there’s F&P, the plumbing and heating distributor to second-line merchants.

And on that subject, I have it on reasonably good authority that TP very nearly bought UGS a couple of years ago . BSS paid a lot less than TP would have done and now TP have ended up with it in the portfolio anyway. Luck or being clever? You decide.

It’s not a done deal by any means, but many of BSS’ shareholders are in favour of it and competition issues are not thought to be a problem if you look at the country as a whole. Could someone else come in and make a counter-bid? Possibly. We’ll have to see.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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