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Grafton buys Leyland SDM for £82.4m
FTSE 250 merchanting and DIY group Grafton has acquired London-based independent specialist decorators' merchant Leyland SDM for £82.4m on a debt-free, cash-free basis.
The consideration will be funded from the group's cash and debt facilities.
Grafton said Leyland is regarded as "one of the most recognisable and trusted decorating and DIY brands in Central London", selling paint, tools, ironmongery and accessories. The business operates through a unique portfolio of stores which have been built up over the last 30 years during its period of family ownership.
Its network of 21 convenience-led and predominantly high street stores, are situated in some of London's most prominent locations including King's Road Chelsea, High Street Kensington, Shaftesbury Avenue, Victoria, Clerkenwell, and Notting Hill. In the last two years, it has opened four new stores in Battersea, Mile End, Clapham High Street and Putney as well as a new distribution centre at Wembley.
Grafton said the Leyland SDM "small box" convenience trading format is a proven business model in Central London that complements its larger Selco branches in Greater London.
For the year ended 31 December 2017, Leyland's revenue and underlying earnings before interest, tax and amortisation were £47.8m and £7.3m, respectively.
Chief executive officer Gavin Slark said: "The acquisition of Leyland SDM is a unique opportunity to acquire a leading brand with exceptional locations in Central London and expands our presence in a resilient segment of the merchanting market located at the heart of one of the world's leading cities."
Numis said the acquisition looks to be "a very sensible deal".
"The scope to provide specialist products into London provides an interesting 'small box' complement to Selco in this market, where - as with Grafton's Dutch operations,which also provide a specialist merchanting offering - management track record is excellent.
"Moreover, the acquisition provides another area where bolt-on and organic growth by branch will complement Grafton's existing growth portfolio,adding a positive dimension in the flat backdrop we expect in the UK market overall. We raise estimates for the current year by 2.8% to account for the acquisition and see this as a further demonstration of management's entrepreneurial ability to outperform the wider merchanting sector through a mix of acquisitive growth and market improvement in key areas."
At 1300 GMT, the shares were up 2.1% to 769p.