Home » Wolseley Buys Nordic Building Products Distributor for $2.48B
Wolseley Buys Nordic Building Products Distributor for $2.48B
July 25, 2006
Wolseley has agreed to acquire DT Group, a distributor of building materials with operations in Denmark, Finland, Sweden and Norway, from CVC Capital Partners for 1.498 billion euros, or $2.48 billion, including the assumption of net debt.
The acquisition will be financed using debt.
About 80% of DT Group's sales are through builders' merchants to trade professionals, 13% to the DIY market, and 7% to the wholesale market. For the year ended Jan. 31, 2006, DT's sales were 2.4 billion euros, or $3.01 billion.
DT Group's EBITDA was $212.87 million (converted), putting the acquisition price at about 11.6X EBITDA.
The business operates from approximately 256 locations across the Nordic region, of which 175 are builders' merchants, 65 are DIY stores and 16 are wholesale outlets. The company has approximately 8,000 employees.
Strategic Rationale The acquisition of DT Group is in line with Wolseley's strategy of expanding its operations by customer, product 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.
Wolseley estimates the construction materials distribution market in this region is worth Euro30 billion. The market remains fragmented, and with DT Group having less than 10% market share there is opportunity for growth. The Nordic economies are robust with GDP growth rates that exceed Euro zone averages. In addition, with low forecast unemployment and inflation, the markets look to remain strong going forward, Wolseley reported.
Acquisition Benefits The DT Group has a strong financial track record with a successful history of organic and acquisitive growth, as well as improved margins and working capital efficiency. In addition to the market's strong anticipated growth, there are significant opportunities to grow the business, organically, through acquisitions, and through synergy benefits with the Wolseley Group.
Organic initiatives will include continued deeper geographic market penetration and an extension of DT Group's branch format and product range. By focusing on the "branch within a branch" concept, which has been highly successful elsewhere in the Group, there is an opportunity to extend the range in areas such as plumbing, electrical and insulation.
The combined strength of DT Group's existing scale and Wolseley's resources represent a significant opportunity for Wolseley to continue its bolt-on acquisition strategy, to maintain its position as a consolidator in the European market.
Additional benefits are expected from initiatives in conjunction with Wolseley on purchasing and sourcing, reducing working capital, cost savings in IT and indirect spend, all contributing to enhanced trading margins.