Wolseley sells loss-making Irish network for just €26.4m
A CHAIN of timber merchants, plumbing suppliers and tile shops which employs 650 people in Ireland and which was assembled by a British company for hundreds of millions of euros, has been sold to two London-based investors for just €26.4m.
The deal ends a traumatic six-year investment in Ireland by building materials supplier Wolseley which is selling off its entire 67-branch Irish network to a private business consortium for just £6.5m in cash with the rest to be paid within a year.
The UK company will book a €55m loss on the Irish operations after selling them to a three-day-old company controlled by healthcare investor James Dominic Weight and Roland Houchin.
The Irish businesses include Heat Merchants, Brooks, Tubs and Tiles and Encon Ireland which had a turnover of €237m in the 12 months to July 31 and losses of €34m.
Wolseley, the world's biggest building materials supplier, had total sales of £14.4bn (€16bn) in the same period.
"That Wolseley management was prepared to sell its Irish businesses at a little over a third of book value must reflect an expectation of significant continuing losses in the medium term," NCB analysts Tommy Conway and Conor Harnett said in a note to investors yesterday.
"It will be interesting to watch if the new owners seek to negotiate their lease terms. Lease terms agreed during the boom years now look unsustainable against the current trading outlook, but public companies like Wolseley and Grafton find it difficult to negotiate lease terms in the same way that many private retail operators are now doing."
The disposal had been expected after the group said in September that it would restructure and focus on its core regions of Britain, the United States and Scandinavia.
Wolseley is disposing of the businesses to focus on activities where it has built sufficient scale and established leading market positions which deliver an appropriate financial return, the company said in a statement yesterday.
Wolseley entered the Irish market in 1999 when it bought Athlone-based Heat Merchants which sells tiles and bathroom products under the Tubs and Tiles brand name. It consolidated its position five years later when it paid around €200m for timber merchant Brooks Group.
Analysts in Britain said the deal could be a first step for Wolseley which may pull out of other countries this year.
"The disposal of its Irish operations is in line with its strategic focus," said Andy Brown at Panmure Gordon. "While the proceeds are not huge it will remove a loss-making operation. While this should help sentiment, we continue to see better opportunities elsewhere in the sector."