Travis predicts more mergers

Published:  04 June, 2010

NORTHAMPTON: The merchant industry is ripe for takeovers said Geoff Cooper, chief executive of Travis Perkins. He expects...

further consolidation in the building materials sector after his firm announced a 553m takeover bid for heating and plumbing specialist BSS.

Mr Cooper said: "We haven't seen a move towards consolidation yet, but it would be quite normal to see consolidation in an industry as it recovers from recession."

"We think that the construction industry is in the middle of a trough and there will be a gentle recovery from here, and believe we can get the benefits of the recovery," he said.

In a statement to the City, the 3bn-turnover firm said both companies had agreed on a strategy for the takeover that hinges on cost savings and efficiencies. The purchase will also boost Travis' heating and plumbing business and will see the combined group become Britain's largest merchant with 26% of the market putting Wolseley at second place with a 20% share.

Mr Cooper said: "It's a great strategic fit for us and creates the largest plumbing and heating trade and retail distribution business in the UK."

Travis Perkins is expected to make a formal offer for BSS, which has a turnover of 1.4bn, in about four weeks, with a final shareholder decision in three months' time.

Kevin Cammack, an analyst with Cenkos, said: "It makes a lot of sense for Travis Perkins, but I'm not entirely sure why BSS is so keen to lose its independence at that price, given it has seen a significant turn in trading fortunes over the past six months and has no need of help. I would have thought BSS could eke out a better price than this."

Charlie Campbell, a Liberum Capital analyst, described the deal as "surprising but positive". He said: "We liked Travis shares before the deal and like them more now, not least because the company's fortunes become less tied to the macro economy."

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