Specialist trade distributor Bss Group (LON:BTSM) is set to recommend a £553m cash and shares offer from builders' merchant Travis Perkins (LON:TPK) . The companies are in advanced discussions following an indicative offer worth 433p per share to BSS shareholders. The indicative offer comprises 232.91p in cash, 0.2608 new Travis Perkins shares per BSS share and the BSS dividend of 6.09p per share. Travis Perkins said a merger would create the leading plumbing and heating trade and retail distribution business in the UK. Its shares responded by rising 8.5% to 808.5p while shares in BSS jumped nearly 35% to 438p.

In a note to shareholders, BSS said that while it remained confident in its own stand-alone prospects, it was ready give the offer the green light given the current volatility in the equity markets, the support of certain shareholders for the indicative offer and the significant scale benefits from a combination.

Travis Perkins said that further consolidation in the UK building materials merchanting sector offered significant scale benefits in terms of cost savings and improved operational efficiency. It added that the recession had accelerated the long-term trend of customers' increasing use of different distribution channels to source building materials. Against this backdrop, the company said there was a powerful strategic logic which underpinned a combination of its own plumbing and heating activities through its existing distribution and retailing businesses with BSS.

In a statement, the company said: “Having successfully integrated a number of merchanting and retailing businesses into the Travis Perkins group, Travis Perkins believes that similar success can be achieved through a combination with BSS and that it should be well placed to realise synergies arising from purchasing efficiencies and the removal of central costs.”

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