Grafton Group builds up its Dutch presence

Grafton Group is expected to keep expanding its presence in the Netherlands after announcing a deal which will significantly boost its market share in the country.

The Dublin-headquartered builders merchanting business yesterday announced it has reached agreement to purchase Gunters en Meuser (G&M); the largest tool and fixings distributor in the Amsterdam market, for an undisclosed sum.

Grafton entered the Dutch market with the €91.5m purchase of tool distributor Isero last year, which marked its biggest acquisition in continental Europe.

The bulk of Grafton’s revenues are derived from its UK merchanting business, but it also has a presence in Belgium. While synergies may exist between the two Dutch businesses, it is expected both will largely remain independent for the foreseeable future as each have distinctive brand identities.

Grafton chief executive Gavin Slark yesterday called G&M “a unique strategic opportunity” to gain a strong presence in the Greater Amsterdam area.

G&M has a near 200-year history behind it and is well-known in the market. While smaller than Isero, G&M is expected to contribute £30m to Grafton’s revenues in the coming year.

“This will be a further important step in the group’s development strategy in the Netherlands and increases our exposure to the growing Dutch economy. The enlarged business should also provide a good platform to capitalise on other appropriate development opportunities,” Mr Slark said.

Davy Stockbrokers yesterday called this a “modest, but strategically important” acquisition for Grafton.

“Over the course of the past 12 months, Grafton has now built a leading position in each of the country’s five largest cities. With around 13% market share, it now has greater scale to fully benefit from the ongoing cyclical recovery in the region.

"We expect Grafton to continue to increase exposure to the country by both organic and inorganic means,” said analysts Michael Mitchell and Flor O’Donoghue in a joint note.

They added: “While modest in the context of the overall group, the deal is of strategic importance to Grafton’s ambitions in the Netherlands market.

Importantly, Grafton now also has a leading position in the important Greater Amsterdam area and, therefore, in the region where population growth is at its fastest.

We understand the combined business will have market share of 13%-14% in the channel, with strong positions in the country’s largest five cities. The addition of G&M strikes us as ‘just the beginning’ for Grafton in the region.”