Heiton Holdings, the Atlantic homecare DIY group, is expanding into the British market through the acquisition of Cooper Clarke Group (CCG), a British builders plc. It has agreed to pay up to £19.8 million sterling (£22.9 million) and the deal represents a significant development by Heiton. CCG will represent about 20 per cent of group sales. Because of its size, the acquisition will have to be approved by Heiton shareholders at an extraordinary general meeting. Heiton said it had received irrevocable undertakings to accept the offer in respect of more than 90 per cent of the equity so the outstanding shares could be compulsorily acquired. It has offered a minimum of £15.7 million, to be paid in stages, plus an extra £4.1 million if certain targeted earnings are achieved. The acquisition of Cooper Clarke "represents a significant development for Heitons", said chief executive, Mr Richard Hewat. "Cooper Clarke provides a blend of proven track record, business growth from innovative products and an experienced management term." The deal, he added "fulfills our expansion target" and he believed it would be "highly successful". Mr Hewat noted CCG's development of own-label and branded products, together with the opening of a new branch in early 1999 which would "position it to deliver further growth".
CCG recorded sales of £38.3 million sterling in 1997 and adjusted pre-tax profit of £1.8 million. Net assets amounted to £6.1 million so the assets are being purchased at a substantial premium.
It would be earnings enhancing, before goodwill, from year one, said finance director, Mr Peter Byers, and earnings enhancing, after goodwill, in the second year. The consideration structure is based on a price/earnings ratio of 13 but, because of the staggered payments, it represents a p/e of 11.6, he added.
There is to be a payment of £8.7 million on completion, £3.5 million one year later (this could rise to £4.9 million if targets are achieved) and a final payment of £3.5 million (which could rise to £6.2 million). The consideration will be paid out of debt, so gearing will rise from 20 per cent to 79 per cent if the full consideration is paid. Interest, however, will be well covered at six times, down from 12. Founded 23 years ago with headquarters in Bolton, in the north of England, and employing 220 people, CCG sources and distributes a selective range of building materials from four locations around Britain.
Heiton said CCG had followed a strategy of new product development and the establishment of specialist niches in key areas with a "differentiated positioning and competitive advantage in a highly fragmented and competitive marketplace". Three branded products account for 10 per cent of sales.
