Grafton pays £82m for top UK decorators
Grafton Group has agreed to pay £82.4m (€93m) to buy London specialist decorator merchant Leyland SDM. The business operates 21 outlets in central London, and generated sales last year of £47.8m (€54m).
The acquisition was broadly welcomed by analysts, who said Leyland would offer Grafton a number of growth opportunities.
Goodbody Stockbrokers said Grafton would be able to leverage Leyland's small store format, which is close to its customer base, with the group's own Selco network.
"The deal is expected to generate double-digit returns on a three-year view," noted Goodbody analyst Robert Eason. "In addition, given Grafton's strong balance sheet there are potentially other acquisitions in this paint/decorating segment as it is a fragmented market."
Grafton is buying Leyland on a debt-free, cash-free basis.
The Irish group, which is a member of the FTSE-250, said that the London business is one of the most recognisable decorating and DIY brands in central London, with strong relationships with trade professionals and DIY customers.
The current Leyland network was built over a 30-year period. The business is controlled by its managing director, Andrew Urban, and his family.
He previously enlisted the help of professional services firm Retail Management Consultants to tackle structural issues and "deep-rooted cultural legacies" with Leyland that were proving an immediate barrier to growth.
Mr Urban had intended to launch the Leyland chain nationwide in the UK. At the time, Leyland had 17 outlets in London. It opened four additional outlets in the past two years.
In 2016, the company generated revenue of £45.3m (€51.1m) and a pre-tax profit of £6.7m (€7.5m). The profit was lower than the £9.6m it made the previous year.
The company said the decline was a result of a significant investment in the business, which included the opening of two new stores and moving its warehouse and office facility to Wembley. It also introduced a new financial system.
Last year, its underlying earnings before interest, tax and amortisation was £7.3m.
Leyland's outlets are in prime London areas including Kensington High Street, Shaftesbury Avenue and Notting Hill.
Grafton CEO Gavin Slark said the acquisition of Leyland "expands our presence in a resilient segment of the merchanting market".
In Ireland, Grafton owns the Woodies DIY chain, as well as Chadwicks and Heiton Buckley. It generates about 75pc of its revenue in the UK, but also has operations in Belgium and the Netherlands.