Grafton ups stake in rival
It follows the purchase of 2.6 million shares 5.3% of the company by its subsidiary Weeksbury on Wednesday. Analysts have ruled out a takeover of Heiton by Grafton.
The share purchase yesterday cost the group about €12 million.
Its earlier 24% stake, held for a number of years, was bought at €33.5m. Yesterday's deal made that worth €58.3m, a huge gain in the initial investment value.
Grafton does not comment on situations like these, but has always insisted its initial swoop on Heiton was "strategic". In other words, to prevent others from challenging Grafton in its domestic market.
Peter Jackson of Bloxham Stockbrokers expects the situation to remain unchanged. He also said Grafton had always insisted to analysts that a takeover was not in its plans.
The two are arch rivals in the Irish market, particularly through their DIY stores, Woodies and Atlantic Homecare.
It is understood that when the block of shares became available, Grafton for the same reason, upped its stake in the company, which gives it effective control of the business.
The statement did not give details of the price at which the shares were bought.
Shares closed at €5 yesterday, valuing the deal at around €12m, while Grafton shares were down 20c to €5.80.
Grafton has been building its stake in Heiton for a number of years.
In the market it is the preferred stock, having more strategic growth potential in Britain, where Heiton has not been quite so successful. About 70% of its turnover is in Britain.
Shares last year were up about 60% on 2002.
With the British economy looking healthy the shares have the potential to make considerable gains.
However, construction and DIY markets can be fickle and influenced by economic conditions.
From an investor point of view its performance in Britain has most impressed in the past three years.
It remains to be seen if it can continue to build on its gains in the coming years.
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