DCC's shares soar on outlook, acquisition
Published 20/05/2015 | 02:30
Distribution group DCC has agreed to buy French LPG supplier Butagaz from Shell for €464m in what will be the Irish company's biggest ever acquisition.
Shares in London-listed DCC rose over 11pc at one point yesterday after it announced strong full-year results and predicted "significant profit growth" for the current financial year.
DCC's operating profit from continuing operations jumped 10.5pc to £221.7m (€308.7m) in the last financial year, with group revenue declining 4pc to £10.6bn (€14.7bn) on the back of softer fuel prices. The group return on capital employed increased to 18.9pc from 16.3pc.
The company is the largest distributor of home heating oil in Britain, where it generated 77pc of its profits last year.
The acquisition of Butagaz marks DCC's first entry into the French LPG market. Butagaz is the second-biggest operator in the sector there, with a 25pc market share. The acquisition will increase DCC's earnings before interest and tax by about £54m (€74m).
The French LPG market is about twice the size of the UK's. Speaking to the Irish Independent, DCC chief executive Tommy Breen said that this is largely because of the more rural demographics in France.
He said the existing Butagaz management team is strong, but that being part of DCC will enable them to pursue new objectives. That will include a push to convert more home users from oil to LPG, he said. One of the main competitors of Butagaz, US-owned Antargaz, is in the process of acquiring another top operator in France, Totalgaz. That transaction is certain to include competition remedies, but Mr Breen said he did not think that any significant acquisition opportunities would result for DCC. He said there may some required divestment as a result of that takeover around the supply infrastructure side.
DCC raised £197.4m (€275m) via a share placement yesterday to fund the Butagaz acquisition.