We must all hang together, or most assuredly we shall all hang separately.
So today we have one builders merchant group less than we had yesterday.
On the day that it announced 11 month results that were really quite a lot better than they might have been, Travis Perkins got the go-ahead to complete its purchase of BSS, the plumbing, heating and industrial pipes and fittings merchants.
The original bid took most of the industry by surprise – in the sense of ‘Wow, didn’t see that coming’ rather than a ‘why on earth are they doing that’. It doesn’t take much to see that such a move makes a lot of sense.
After a period of serious consolidation in the merchanting sector, it all went a bit quiet and then when the recession hit, no-one had any money, time or inclination to think about anything other than just getting through it. But you don’t run very successful FTSE businesses by not having a weather eye on the future and Travis CEO Geoff Cooper always knew that he would be back in the market for acquisitions, eventually.
The deal allows Travis Perkins to seriously challenge Wolseley’s domination of the plumbing and heating merchants sector and will bring it some serious clout in terms of buying power. Although, I suspect that may have been at the root of some of the objections and concerns expressed to the OFT.
BSS has always had an entrepreneurial culture, while Travis Perkins has always had some of the best gross margins in the business. The combination of the two looks promising.
In order for the deal to go through and not be referred to the Competition Commission, Travis Perkins had to agree to dispose of branches in the 20 locations where the OFT decided there could be a restriction of competition otherwise. What exactly happens with those branches will, I suppose, depend where they are and what the market is like in those areas. There are probably a few people out there with their eyes on those locations.
I really hope I’m not tempting fate by saying that it seems as though, for merchants, the worst of the worst is behind us, but there does seem to be a lot more optimism out there now. The TP report for the first 11 months was upbeat, Wolseley’s latest statement similarly so and it’s the UK businesses that are helping Grafton turn the corner.
The VAT rise from 17.5% to 20% in January is having an effect in kitchen sales, with orders coming in on both trade and retail side from people anxious to beat the rise. We may see a bit of a dip after that as the increase kicks in and the fact that local authority charges for planning permission etc are going up across the country won’t help. But it does seem to be more positive out there. Unless we get more snow.