Fer­gu­son’s €1bn sale of Nordic unit could fund spe­cial div­i­dend

The Daily Telegraph - - Business - By Alan Tovey

PLUMB­ING and heat­ing sup­plier Fer­gu­son has raised the prospect of a spe­cial pay­out to in­vestors af­ter sell­ing its Nordics di­vi­sion to a pri­vate equity firm.

FTSE 100-listed Fer­gu­son – known as Wolse­ley un­til it re­branded in July – sold the un­der­per­form­ing build­ing ma­te­rial dis­tri­bu­tion busi­ness to Stark Cap­i­tal, part of Lone Star Funds. The sale, for €1.025bn (£910m), was on a debt-free and cash-free ba­sis, and costs re­lated to the deal are ex­pected to be about €50m. Net as­sets of the busi­ness be­ing sold are around the €500m mark, and Fer­gu­son is re­tain­ing about €150m of prop­erty. It is ex­pected this will be sold off at a later date.

John Martin, the chief ex­ec­u­tive of Fer­gu­son, which op­er­ates the Plumb Cen­ter brand in the UK, ex­plained that the sale would “en­able us to con­tinue to focus on our strat­egy of ac­cel­er­at­ing prof­itable growth in our plumb­ing and heat­ing businesses”.

He added that once the deal, which will re­quire the ap­proval of reg­u­la­tors, is com­pleted, man­age­ment would be up­dat­ing their in­vestors on “as­set al­lo­ca­tion plans in­clud­ing the util­i­sa­tion of ex­cess cash”.

An­a­lysts at Davy said the sale price rep­re­sents 6pc of the cur­rent share price on a per share ba­sis. They added that they would not be sur­prised if the ex­cess cash was re­turned to share­hold­ers, adding that as a re­sult of the dis­posal Fer­gu­son is “ef­fec­tively net cash on a pro forma ba­sis”.

Bank of Amer­ica Mer­rill Lynch has echoed the sen­ti­ment, point­ing to its note last week sug­gest­ing that Fer­gu­son “could af­ford to re­turn 15pc to 20pc of its mar­ket cap to share­hold­ers over the next 12 to 18 months through div­i­dends and buy-backs”. The price achieved by Fer­gu­son, which re­named to its US brand be­cause more than 80pc of its rev­enues are de­rived from North Amer­ica, was also more than some an­a­lysts had been ex­pect­ing.

How­ever, the deal and the po­ten­tial for an ex­tra pay­out drew a muted re­ac­tion from in­vestors, with the shares re­vers­ing early gains to end the day down 0.4pc at £52.95.

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