DIY landscape is transformed by two major deals

AnalysisIt has taken just one week for the competitive landscape for Irish merchanting and DIY to be changed utterly.

First, the market was treated to Wolseley's €183 million purchase of Brooks, the Republic's third biggest merchanting - selling supplies to the building industry - firm. And now, the two largest players are set to become one, creating a company with the same turnover as sectoral giants, Wolseley - counting its UK and Ireland merchanting businesses - or Travis Perkins.

The exact way in which Grafton's takeover of Heiton could be managed remains to be seen, but further details will emerge in an offer document due out next week. These will be closely read by Heiton shareholders, who, analysts believe, will accept the offer.

The two firms are understood to have been concentrating to date on meeting yesterday's Takeover Panel deadline for a deal. Final discussions on the provisional offer are believed to have taken place as late as yesterday morning.

The offer document may shed some light on how the Competition Authority might view the deal, with Grafton sure to have been taking advice on this issue from its lawyers as negotiations on price continued.

Industry estimates suggest that on the DIY side - Woodie's and Atlantic Homecare - a combined entity would hold almost 16 per cent of a market worth some €1.2 billion. On the merchanting side, meanwhile, the two would have about 20 per cent of a €3 billion market through Heiton Buckley and Chadwicks.

This latter measure is the one that is likely to raise most eyebrows with the Competition Authority, which would tend to favour a combined market share of less than 20 per cent in takeover situations. Coming close to this level could hamper, for example, any plans Grafton may have in the future to mop up some of the 300 or so independent builders' merchanting firms that still remain in the Republic.

The market as a whole remains highly fragmented and, as evidenced by Wolseley's takeover of Brooks, international players are not unaware of the value contained therein.

Merrion analyst, Mr John Mattimoe, points out, however, that the authority could decide to deal with a Grafton/Heiton union by looking at the potential lessening of competition on a local rather than national basis. This would, potentially, make approval a more straightforward proposal.