It's difficult to know what to make of Grafton spending £4.3 million (€5.46 million) on a 4.9 per cent stake in Heiton. If this is a preamble to making a full bid or persuading Heiton to get involved in merger talks, then it makes sense.

But if it is a defensive move aimed at frustrating British groups like Wolseley, Travis Perkins or Meyer using Heiton as a backdoor into the Irish building materials sector, then it is not enough. Grafton's 4.9 per cent stake in Heiton will not prevent any of the British groups making a pitch for Heiton.

And there is little doubt the Irish building boom has attracted the avaricious gaze of the British merchants, drawn by 10 per cent growth rates in Irish building output compared to the miniscule growth rates in their home market. At this stage, with Wolseley's £20 million acquisition of Heatmerchants indicating a serious intention by the British giant to move into Ireland in force, Richard Hewat and Leo Martin might be well-advised to sound out Michael Chadwick about a merger. There is going to be consolidation in the Irish building materials industry, whether it is forced by the threat of an incursion by the likes of Wolseley, or by institutional shareholders who see the sense in creating one big Irish materials group in the new "big is better" fund management thinking.

Of course, Heiton management might be reluctant to get involved in a merger with Grafton which is three times bigger. After a merger, there might be joint chairmen (like Irish Life & Permanent) but realistically there can only be one chief executive and Michael Chadwick is unlikely to cede that top position to Leo Martin.

But whatever about the competition implications - and there are certainly going to be some problems - there is a compelling logic to a Grafton-Heiton tie-up. Grafton is big in concrete products and mortar, Heiton is big in timber. Both are big in DIY, while Heiton has a strong presence in equipment hire and steel.

Both groups are enjoying unprecedented levels of business and profit margins. But even a merged HeitonGrafton would still only have combined sales of £550 million while Wolseley last year had sales of £2.6 billion sterling - close on £3 billion. That gives the British group enormous purchasing power to challenge Heiton, Grafton or a combination of the two if it chooses to build on Heatmerchants and establish a major presence in Ireland.