Huws Gray acquires merchanting businesses from Grafton Group

Grafton Group plc has agreed to divest its UK traditional merchanting business (the Business) in for an enterprise value of £520 million to Huws Gray, making it the UK’s largest independent builders’ merchant.

Grafton will retain freehold properties with development potential that have a market value of circa £25 million. The agreement follows the announcement in April 2021 of a strategic review of the business.

The Business comprises the Buildbase, Civils & Lintels, PDM Buildbase, The Timber Group, Bathroom Distribution Group, Frontline and NDI brands.

In the year to 31 December 2020, the Business reported revenue of £828.2 million and adjusted operating profit of £18.8 million, a decline from £1.02 billion and £33.3 million respectively in 2019.

Meanwhile, gross assets at 31 December 2020 were £497.2 million. Grafton will retain responsibility for the UK defined benefit pension scheme, which was closed to future accrual at the end of 2020, when alternative arrangements were put in place.

Huws Gray will be notifying the transaction to the Competition and Markets Authority (CMA). The divestment is expected to close by the end of the first quarter of 2022 and completion is not conditional on the outcome of the CMA process.

Following completion in 2022, the Group will, in the normal course of events, update shareholders and the market on the use of the proceeds from the divestment, which will be receivable in full in cash on completion.

The decision to divest followed a comprehensive strategic review of the Business which concluded that exiting this segment of the building materials distribution market in the UK would enable the Group to optimise shareholder value. Grafton will continue to develop its Selco Builders Warehouse branch network and its other specialist distribution and manufacturing businesses that have been the focus of significant investment and value creation over recent years. Completion of this transaction will also enable the Group to focus on its international development strategy, which will be a key priority over the coming years.

Commenting on the divestment, Gavin Slark, chief executive officer of Grafton, said: “The divestment secures future opportunities for all stakeholders as part of an enlarged general merchanting business. I would like to thank all our colleagues in the Business for their longstanding contribution to Grafton and wish them every success in the future. 

“This is an attractive outcome for Grafton and is in line with our strategy of deploying our capital resources towards higher growth potential businesses offering superior returns.”