Plumbing and heating concern Wolseley is believed to be one of the firms bidding about £1 billion for Swedish industrial materials supplier Ahlsell.
The business - which has a major presence in the Midlands - is competing against a handful of private equity firms in the auction, which has been running for several months and is nearing its final stages, sources said yesterday .
Ahlsell's private equity backer Nordic Capital is selling the company in an auction being run by Morgan Stanley, they said.
And Morgan Stanley is also offering a financing package for bidders which was oversubscribed, it was claimed.
One report said the investment bank completed the syndication of 1 billion euros (£689 million) of Ahlsell debt this month before starting the sale of the equity.
Wolseley has an internal target to grow sales by at least ten per cent each year, and typically half of that, or about £250 million worth, comes through acquisitions.
The Reading-based group runs the headquarters of its UK arm at Leamington Spa where it employs about 350 people.
It is also creating a huge new distribution centre in the town, which will increase the capacity of Wolseley's UK distribution network through its1,500 branches, which include the Build Center, Climate Center and Plumb Center chains.
The group posted an expected 16 per cent rise in annual profit on September 26 and predicted higher US sales following the devastation caused by Hurricane Katrina.
Wolseley and Morgan Stanley yesterday declined to comment. But brokers believe it is only matter of time before parent company Wolseley makes its next big acquisition.
"The story is consistent with what we know of what Wolseley is trying to do. It wants to be in Scandinavia and is bound to be interested in any related business in these areas," said David Taylor of stockbrokers Teather & Greenwood.
A Wolseley spokesman said "we don't comment on market speculation."
Wolseley has been looking for a more sizeable deal for some time.
Its last major acquisition was the £390 million paid for Pinault Bois & Materiaux in July 2003 and last year it walked away from DIY group Wickes, which was sold to Travis Perkins for £950 million.
Wolseley also lost out in the bidding for Dahl International, another Swedish heating and plumbing products firm, which went to Saint-Gobain in March last year.
Wolseley has the financial firepower to do a major deal and most analysts reckon a deal of over £1 billion is feasible.
"Wolseley is due another deal and has the financial capacity to execute it," said Teather & Greenwood's Taylor.
While the group has been busy augmenting organic growth with some smaller deals, analysts now believe the group needs another deal to keep its earnings momemtum moving ahead.
Last year, the group spent £431 million on 26 businesses.
Tessa Guy at stockbrokers Seymour Pierce. "A deal (for Ahlsell) would continue Wolseley's strategy of taking market share in Europe and Ahlsell has low exposure to the DIY market."