Plumbing and building supplier Wolseley plugged a gap in its business yesterday after agreeing to buy Danish rival DT Group from CVC Capital for £1.35 billion, including £330 million of debt.
With more than 8,000 employees and 256 outlets, DT Group is the largest builders' merchant in Denmark and Sweden and the second largest in Finland.
Wolseley said the deal was immediately earnings enhancing and would give it access to four Nordic countries that are ripe for consolidation in the construction materials market, which it estimated at w orth 30 billion euros (£20.5 billion).
In a statement Wolseley said: "The acquisition of DT Group is in line with Wolseley's strategy of expanding its operations by customer, prod-uct and geography.
"This transaction is particularly attractive as it marks Wolseley's entry into the Nordic building materials sector and strengthens the group's footprint in the European construction materials distribution market."
It added: "The market remains fragmented, and with DT Group having less than ten per cent market share there is good opportunity for growth. The Nordic economies are robust with GDP growth rates that exceed Euro zone averages. In addition, with low fore-cast unemployment and inflation, the markets look to remain strong going forward."
Analysts said the deal looked expensive, but was worth it for the new growth opportunities.
"This does look pretty full," said analysts at Numis Securities. "However, this is explained by the strategic rationale of the deal as the acquisition gives Wolseley its first business in the Nordic building materials sector."
The acquisition is likely to offset recent market jitters over the Reading-based g roup's exposure to a downturn in the US housing market.
Analysts at UBS said the shares were trading at a PE of 10.2 times 2007 earnings before the deal, falling to 9.8 times after the deal.
"At this level we think all the bad news from US housing is in the price," they said, referring to the slowdown in the North American housing market.
Wolseley chief executive Charlie Banks said DT Group already had a list of potential acquisitions in the region, which Wolseley would carry out where appropriate.
Cost savings from the deal will boost DT Group's pretax profit by about two per cent.
Including assumed debt of about £330 million, the deal gives an enterprise value for DT Group of £1.35 billion.
The acquisition will be financed using debt, Wolseley said, adding that regulatory approval is expected to take up to two months, so the transaction will not complete until during its next financial year.
Wolseley has more than 70,000 employees operating in 14 countries, including 1,670 branches in the UK. Revenues for the year to July 31 last year were about £11.3 billion with operating profits reaching £708 million.
In the Midlands the company has nearly 400 people at its offices in Leamington Spa, which will also soon be the site for its national distribution centre employing a further 150.