Wolseley on Potential Stock Sale: 'Riding Out the Storm Not an Option'

Wolseley has confirmed at least one of the rumors floating around this past summer. It is considering a sale of Stock Building Supply, its building materials arm in the U.S. UK-based Wolseley, a global building materials/plumbing/HVAC distributor, also owns Ferguson.
 
Wolseley Chief Executive Chip Hornsby said in a Webcast Q&A this week that he expects the new residential market to get worse before it gets better, and that riding out the storm is not an option for us." He also said that the company had done pretty much all it could do in cutting costs at Stock. "We must acknowledge that further large-scale reduction of Stock will inevitably eat into the infrastructure of the business," he says.
 
Stock lost £123 million in the 2008 fiscal year. That's about US$227 million. (Read more on results here.) Stock grew to more than $4 billion in annual sales through the acquisition of smaller family-owned businesses throughout the U.S.
 
Potential buyers for the Stock unit? Any guesses of course would be pure speculation. There is always the possibility that a private equity firm or firms would see this as an attractive value buy and long-term investment opportunity. That said, the credit markets do not favor big deals right now.
 
ProBuild Holdings is among the most likely acquirer for Stock as the relatively new holding company has been a surprisingly active acquirer in the space in the past two years, despite the residential housing downturn. In fact, it bought HD Supply's Lumber and Building Materials assets shortly after HD Supply was spun off of The Home Depot. (To that end, The Home Depot is very unlikely to make a foray back into the wholesale business.)
 
Some history on ProBuild: ProBuild CEO Paul Hylbert said in a press release in February 2008 that the company is "pursing a strategy of aggressive growth, both organic and via acquisition." ProBuild has bought at least five companies (distributors and manufacturers) since the start of 2008, and several more in 2007. Each brand retains its name.
 
Per ProBuild's Web site, the organization was formed in 1997 when Fidelity Capital (investing on behalf of Fidelity Investments) acquired the Strober Organization -a supplier of building materials in the Northeast. The plan was to aggressively grow the company, and it did. Some of the company's largest acquisitions include: Lanoga Corp., with 320 locations, and, Hope Lumber and Supply, with 50 locations. ProBuild also owns: United Building Centers, Spenard Builders Supply, Lumbermens, Home Lumber Company, Dixieline Lumber Company, Parker Lumber Company, F. E. Wheaton &Company, Strober Building Supply, U.S. Components, and the Contractor Yard.
 
The Denver, CO-based ProBuild now operates more than 520 lumber and building product distribution, manufacturing and assembly centers in 40 states.
 
According to its Web site, Stock has around 300 branches.
 
Of course, the fate of Stock Building Supply is in the air -Hornsby says that the company will announce more details and will possibly have a decision in November at its annual meeting.
 
Here are some articles on Wolseley from the MDM archives:
MDM Interview, Part I: Wolseley CEO on Distributor's Localized Strategy
MDM Interview, Part 2: Wolseley's European Ambitions