Grafton takes over Spanish HVAC firm Salvador Escoda

30th Oct 2024 14:37

(Sharecast News) - Building materials distributor and retailer Grafton Group announced on Wednesday that it had completed the acquisition of Salvador Escoda, one of Spain's biggest HVAC distributors, for a maximum consideration of €132m.

The FTSE 250 company said Salvador Escods, founded in 1974, distributes air conditioning, ventilation, heating, water, and renewable products to professional installers across residential, commercial, and industrial sectors.

Based in Barcelona, the company operates 93 branches and four distribution centres across Spain, including a new facility in Seville.

Over half of its sales came from private label brands like Mundoclima and Escoclima.

This acquisition aligned with Grafton's strategy to acquire platform businesses in fragmented markets with strong growth potential.

Spain - the EU's fourth-largest construction market - has a favourable economic outlook through 2026 and high demand for HVAC products, partly driven by climate change and regulatory support, Grafton's board explained.

Salvador Escoda's existing management team would remain in place, with company founder Salvador Escoda Forés appointed as honorary chair.

Grafton said it would support Salvador Escoda's brand growth, organic expansion, and potential future acquisitions in the Iberian market.

In a concurrent trading update, Grafton reported that while Ireland had shown strong performance, the UK and Finnish markets remained challenging due to weaker seasonal demand.

Despite those pressures, the group said it expected its full-year adjusted operating profit to align with forecasts, underpinned by tight cost control.

The Salvador Escoda acquisition was projected to enhance earnings in its first full financial year.

"The purchase of Salvador Escoda is an excellent fit with Grafton's strategy of acquiring platform businesses in new markets which possess strong and unique propositions with the opportunity to drive further growth and scale," said chief executive officer Eric Born.

"We see long term structural growth in the Spanish economy and in its fragmented distribution markets for building and construction products.

"Salvador Escoda's leading own brands in categories such as ventilation and air conditioning are an exciting new adjacent channel for Grafton."

Born said the company "looked forward" to working with the "experienced and successful" team to build on their "rich heritage", and accelerate their track record of growth.

"In addition to today's announcement, we continue our patient, methodical assessment of additional organic and acquisition opportunities in our chosen European geographies, and in particular founder-run businesses, attracted by Grafton's entrepreneurial pedigree and supportive, decentralised structure."

At 1418 GMT, shares in Grafton Group were up 4.89% at 1,048.4p.

Reporting by Josh White for Sharecast.com.