Travis Perkins predicts more merchant mergers

Cooper (pictured) said that although corporate activity in the sector was subdued, economic conditions were ripe for further takeovers.

“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,” he said.

“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 added.
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.

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.”

He said Travis Perkins expected to make a formal offer for BSS, which has a turnvoer 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.”

Meanwhile, 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 macroeconomy.”