24th Jul 2006 07:02
Wolseley PLC24 July 2006 NEWS RELEASE 24 July 2006 Wolseley announces the conditional acquisition of DT Group for €1,982 million (£1,353 million) Offer for DT Group Wolseley today announces that it has signed an agreement, conditional only uponregulatory approval, to acquire DT Group (formerly known as Danske Traelast),the Nordic region's leading distributor of building materials, from CVC CapitalPartners. Cash consideration of €1,498 million (£1,023 million) representing theequity value of DT Group has been agreed which, including the assumption of netdebt as at 30 June 2006 of €484 million (£330 million), gives an enterprisevalue of €1,982 million (£1,353 million). The acquisition will be financed usingdebt. DT Group's business DT Group is the leading distributor of building materials for tradeprofessionals and consumers in the Nordic region, with operations in Denmark,Finland, Sweden and Norway. Approximately 80% of its sales are through builders'merchants to trade professionals, 13% to the DIY market, and 7% to the wholesalemarket. For the year ended 31 January 2006, DT Group's audited accounts reportedrevenue of €2.4 billion (£1.6 billion), EBITDA of €169.5 million (£115.7million) and EBITA of €141.0 million (£96.2 million). Gross assets, excludingdebt, as at 31 January 2006 were €1.1 billion (£773.4 million). The unauditedmanagement accounts for the twelve months to 30 June 2006 show revenue of €2.5billion (£1.7 billion), EBITDA of €184.7 million (£126.1 million) and EBITA of€157.1 million (£107.3 million). The business operates from approximately 256 locations across the Nordic region,of which 175 are builders' merchants, 65 are DIY stores and 16 are wholesaleoutlets. The company has approximately 8,000 employees. Management DT Group's President and CEO Steen Weirsoe (58) has over 30 years of industryexperience and will continue to have responsibility for the business as part ofWolseley's European division, led by Europe CEO Rob Marchbank. All of the keyoperational management and staff of DT Group will remain with the business andjoin the Wolseley Group. In addition, a number of senior management fromWolseley will be assigned to work with the existing management team and assistwith the integration into the Group. Strategic Rationale The acquisition of DT Group is in line with Wolseley's strategy of expanding itsoperations by customer, product and geography. This transaction is particularlyattractive as it marks Wolseley's entry into the Nordic building materialssector and strengthens the Group's footprint in the European constructionmaterials distribution market. The construction materials distribution market in this region is worth €30billion. The market remains fragmented, and with DT Group having less than 10%market share there is good opportunity for growth. The Nordic economies arerobust with GDP growth rates that exceed Euro zone averages. In addition, withlow forecast unemployment and inflation, the markets look to remain strong goingforward. Acquisition benefits The DT Group has a strong financial track record with a successful history oforganic and acquisitive growth, as well as improved margins and working capitalefficiency. In addition to the market's strong anticipated growth, there aresignificant opportunities to grow the business, organically, throughacquisitions, and through synergy benefits with the Wolseley Group. Organic initiatives will include continued deeper geographic market penetrationand an extension of DT Group's branch format and product range. By focussing onthe 'branch within a branch' concept, which has been highly successful elsewherein the Group, there is an opportunity to extend the range in areas such asplumbing, electrical and insulation. The combined strength of DT Group's existing scale and Wolseley's resourcesrepresent a significant opportunity for Wolseley to continue its bolt-onacquisition strategy, to maintain its position as one of the leadingconsolidators in the European market. Additional benefits are expected from initiatives in conjunction with Wolseleyon purchasing and sourcing, reducing working capital, cost savings in IT andindirect spend, all contributing to enhanced trading margins. The combined effect of all these initiatives is expected, over time, to generateadditional pre-tax earnings in excess of 2% per annum of DT Group's existingrevenues. Financial effects of acquisition The acquisition of DT Group is expected to be earnings enhancing from the outset. The return on gross capital employed (ROGCE) is expected to exceed Wolseley'spre-tax weighted average cost of capital (WACC) in the first full year followingthe acquisition and exceed Wolseley's normal hurdle rate for a strategicacquisition, being an incremental 5% over pre-tax WACC by year five followingthe acquisition. The acquisition of DT Group will take Wolseley's gearing toapproximately 128% with pro-forma interest cover (before amortisation ofintangibles) in excess of 7 times. Regulatory approval is expected to take up to two months therefore thetransaction will not complete until Wolseley's next financial year (commencing 1August 2006). Charles Banks, Group Chief Executive of Wolseley said: "We are delighted to announce this acquisition, which gives us a major presencein the Nordic region for the first time and significantly broadens our Europeanreach. Already a strong performer, DT Group enhances our position in buildingmaterials in Europe and provides a platform for future growth. We look forwardto working with the DT Group management and employees as part of the WolseleyGroup and to driving the business forward together." Note: An exchange rate of £1 = €1.465 and €1 = DKK7.45 has been used throughoutthis announcement. Details of Analysts' Conference Call There will be an analyst conference call today at 8.15 am (BST):Dial in number: +44(0)1452 561 263Pin code: 3479791Slides to accompany the call will be available from 7.30 am on www.wolseley.comThe call will be recorded and available for playback for 14 days from 1.30 pmtoday, on the following number: Replay dial-in number: +44(0)1452 55 00 00Replay access code: 3479791#__________________________________________________________________________ Enquiries: Investors/Analysts: Guy Stainer 0118 929 8744Head of Investor Relations 07739 778187 John English 001 513 771 9000Director, Investor Relations North America 001 513 328 4900 Press:Penny Studholme 0118 929 8886Director of Corporate Communications 07860 553834 Brunswick 020 7404 5959Andrew FenwickNina Coad__________________________________________________________________________ Advisors Wolseley has been advised by Lehman Brothers on this transaction. UBS Limited isacting as Corporate Broker to Wolseley on this transaction.__________________________________________________________________________ Notes to Editors Wolseley plc is the world's largest specialist trade distributor of plumbing andheating products and a leading supplier of building materials to professionalcontractors in North America, the UK and Continental Europe. Group revenues forthe year ended 31 July 2005 were approximately £11.3 billion and operatingprofit, before amortisation of acquired intangibles, was £708 million. Wolseleyhas more than 70,000 employees operating in 14 countries namely: UK, USA,France, Canada, Ireland, Italy, The Netherlands, Switzerland, Austria, CzechRepublic, Hungary, Belgium, Luxembourg and Denmark. Wolseley is listed on theLondon and New York Stock Exchanges (LSE: WOS, NYSE: WOS) and is in the FTSE 100index of listed companies. DT Group, (formerly known as Danske Traelast) is the leading distributor ofbuilding materials in the Nordic region with sales of €2,359 million (£1.6billion) for the year ended 31 January 2006. As at 31 January 2006 (being thedate of DT Group's last audited consolidated accounts) the profits attributableto DT Groups assets were €100.7 million (£68.7 million) and the gross assetswere €1,133 million (£773.4 million). The Company has three business areas:builders' merchants (80% of sales), DIY stores (13% of sales) and wholesalers(sales 7%). It is the largest builders' merchant in Denmark (Stark) and Sweden(Beijer Byggmaterial), the second largest in Finland (Starkki) and a regionalleader in Norway (Neumann Bygg). DT Group is also the market leader in theDanish DIY market through the Silvan brand. The company has more than 8,000employees and 256 outlets, of which 175 are builders merchants, 65 are DIYstores and 16 are wholesale locations. Background on CVC Capital Partners. CVC is an independent private equity group, which advises funds of over €16.8billion in Europe and Asia. Since 1996, CVC has been the most active privateequity firm in Europe, with CVC funds investing some US$7 billion in buyouttransactions. During this time, CVC funds have also achieved top quartileperformance based on independent benchmark analysis undertaken by CambridgeAssociates. CVC operates an integrated European network of 12 offices. CVC'sEuropean operations have an experienced team of 62 investment professionals led by 16 partners who are responsible for evaluating investments, providingstrategic input to portfolio companies and maintaining a regular dialogue withinvestors. The current European portfolio totals 41 investments. ________________________________________________ Certain statements included in this announcement may be forward-looking and mayinvolve risks, assumptions and uncertainties that could cause actual results todiffer materially from those expressed or implied by the forward lookingstatements. Forward-looking statements include, without limitation, projectionsrelating to results of operations and financial conditions and the Company'splans and objectives for future operations including, without limitation,discussions of the Company's business and financial plans, expected futurerevenues and expenditures, investments and disposals, risks associated withchanges in economic conditions, the strength of the plumbing and heating andbuilding materials market in North America and Europe, fluctuations in productprices and changes in exchange and interest rates. All forward-lookingstatements in this respect are based upon information known to the Company onthe date of this announcement. The Company undertakes no obligation to publiclyupdate or revise any forward-looking statement, whether as a result of newinformation, future events or otherwise. It is not reasonably possible toitemise all of the many factors and events that could cause the Company'sforward-looking statements to be incorrect or that could otherwise have amaterial adverse effect on the future operations or results of the Company. Nostatement in this announcement is intended to be a profit forecast or to implythat the earnings per share of Wolseley for the current or future financialyears will necessarily match or exceed the historical or published earnings ofWolseley. - ENDS - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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