Sale sees Wolseley cut its presence in Ireland

Wolseley is selling 67 branches to private buyer WIBHM for 5.8m cash, with the balance made up by a loan note.

"Wolseley is disposing of the businesses in line with its strategy of focusing its activities where we have built sufficient scale, established leading market positions and can deliver an appropriate financial return," it said in a statement.

The group, which describes itself as the world's largest trade supplier of plumbing and heating products, is a major player in the UK, North America and Europe. In the UK it operates through subsidiaries including Plumb Center and Build Center.

It has been forced to make thousands of job cuts during the downturn as construction projects dried up on both sides of the Atlantic.

Last year it closed a small distribution centre in Ripon, although still has a larger distribution centre in Melmerby, near Ripon, which employs 200 people. It moved its UK head office from Ripon to Warwickshire in 2005.

Wolseley Ireland Holdings Limited (WIHL) employs about 650 staff and in the year to the end of July made losses of 30m on sales of 204m. By July last year the "severely depressed " Irish construction market had forced Wolseley to cut about half its employees there, compared to the 2007 peak.

Chief executive Ian Meakins, who was appointed last summer, said: "I am confident that the transaction we have concluded with WIBHM Limited represents a good outcome for Wolseley's shareholders. It will also enable us to bring an even greater degree of focus on driving performance improvement in our core UK businesses."

Wolseley said it had also agreed to fund a deficit in its Northern Ireland pension scheme currently estimated to be 4.9m.

The pension deficit will be repaid by the purchaser through a separate loan note with a coupon of three per cent and repayments due to start at the end of its second year at a rate of 1.3m annually.

Both loan notes are secured in full on WIHL freehold property assets in Ireland, Wolseley said.

The businesses to be sold in the Republic of Ireland include Heat Merchants, Brooks, Tubs and Tiles and Encon Ireland while in Northern Ireland the company is selling its Brooks business.

Wolseley said its Irish sales for the five months to the end of 2009 were 67m, making underlying losses of 4.6m. Net assets on completion are estimated to be 66m. The group added it will make an exceptional pre-tax loss of about 50m on the sale.

Analysts said they were encouraged because the disposal shows Mr Meakins is forging ahead with restructuring.

"We consider this as good news given that it exits a 30m loss-making business, which is un-likely to ever recover anywhere close to its pre-crisis high," said analysts at MF Global. "(It) refocuses its efforts on businesses with scale and the potential to return to reasonably attractive margins and returns over time and shows that the new chief executive is getting on with restructuring this business."

Analysts at Liberum Capital said "it demonstrates management's determination to restore Wolseley's profitability to respectable levels".

Analysts at Numis Securities said Wolseley's management has been guilty of "value destruction", as Heat Merchants and Brooks were acquired for a total of more than 150m. But they added: "The disposal of these assets is an obvious initial move in terms of strategic aims."

Starting life down under

Wolseley emerged from manufacturing roots and began life in 1887 in Sydney, Australia when Frederick York Wolseley founded the Wolseley Sheep Shearing Machine Company.

Nine years later the first Wolseley motor car rolled off a production line in Birmingham.

Over the next century the company grew rapidly and moved into heating, industrial pipes and distribution through acquisitions and organic growth.

However, after suffering during the latest downturn, it embarked on a series of deep cost cuts, axing thousands of jobs and closing hundreds of branches.