Grafton Group has bought the north Dublin plumbing and bathroom firm Davies and the Roscommon builders' merchant Garvey's, brushing aside fears that its €338 million purchase of rival group Heiton's would prevent further Irish deals.
The value of the transactions was not disclosed but the Davies sale benefits Dublin businessmen Albert Carroll, Declan O'Donnell and Gerard Tobin while the Garvey's sale provides a return for Co Galway businessman Seán Garvey. From Glenamaddy, Mr Garvey is well-known locally as the host for 16 years of a weekly DIY programme on Shannonside-Northern Sound radio.
Grafton chairman Michael Chadwick declined to reveal the value of the transactions, which continue the trend of rapid consolidation in the builders' merchants market. Mr Chadwick said the group's strategy was to expand organically and through acquisitions in Ireland and Britain.
Analyst Robert Eason at Goodbody Stockbrokers said the two deals together could add up to one cent per share to Grafton's earnings next year. "People may have thought after the Heiton deal that Grafton was limited in terms of doing further deals. Clearly this shows it can still play a part in the consolidation of the Irish merchant market, as well as in the UK."
With a combined tunover of €47.4 million, the two companies together could be worth in the region of €33.18 million on the very rough basis of the 0.7-times sales multiple that applied to the Heiton deal last January.
The Competition Authority was notified of the latest acquisitions and it raised no objection to the transactions. Grafton has no merchant operations in Roscommon and the Davies deal introduces a new segment to its business.
In business since 1933, Davies changed hands in 1986 and moved in 2003 from its original outlet in Fairview to a four-acre site at Harmonstown Road, Raheny. In addition to bathrooms, it sells heating and drainage systems. It also has an outlet in Kilmacanogue, Co Wicklow.
Analysts believe Grafton bought the two Davies sites outright, as the value of the assets acquired was relatively high at €24.8 million. The company's current annual sales are worth some €37.4 million. On sales of €32.56 million in 2004, Davies had operating profits of €1.25 million. However, the operatng profit margin fell in the year to 4 per cent from 7 per cent.
Mr O'Donnell, a 42 per cent shareholder, and Mr Carroll, 27.67 per cent, are retiring from the business. Mr Tobin, who held the remaining shares, is staying on to manage the business.
Mr Garvey, who was advised by AIB Corporate Finance, declined to reveal the price his business fetched. Accounts for Garvey (Roscommon) show that its operating profit grew to €356,056 last year from €231,179 in 2003. Grafton said the company has sales of more than €10 million.
Shares in Grafton Group rose 15 cent to close in Dublin last night at €8.46.
