UK DIY News

Grafton Group Acquires Salvador Escoda, S.A. In Spain

Grafton Group plc ("Grafton" or the "Group"), the international building materials distributor and DIY retailer, is pleased to announce that it has acquired the entire issued share capital of Salvador Escoda, S.A. ("Salvador Escoda") from Escoda Sans, S.L. Salvador Escoda, founded in 1974 by Mr. Salvador Escoda Forés, is one of Spain's leading distributors of air conditioning, ventilation, heating, water and renewable products serving professional installers across the residential, commercial and industrial sectors.

The total consideration payable is a maximum of €132.0 million on a cash and debt free basis (before leases¹), with €128.0 million payable at completion and a further €4.0 million payable subject to financial performance conditions. Salvador Escoda reported revenue of €231.8 million and adjusted operating profit on a local GAAP basis¹ of €16.5 million for the year ended 31 December 2023. Since 2019, the compound growth rate of revenue has been approximately 9 per cent per annum.

The acquisition of Salvador Escoda is consistent with Grafton's strategy of acquiring platform businesses with strong and unique propositions offering exciting growth opportunities and which operate in fragmented markets with strong underlying fundamentals.

Spain is the fourth largest construction market in the EU and is forecast to have one of the fastest growing economies in Western Europe over the period 2023 - 2026². The building materials distribution market is highly fragmented and within this market, Heating, Ventilation and Air Conditioning has been identified as one of the strongest growth segments partly as a result of climate change supported by replacement cycle dynamics and a favourable regulatory environment.

Salvador Escoda, headquartered in Barcelona, operates from 93 strategically located branches throughout Spain which are supported by four distribution centres, including a new 18,000 square metre facility in Seville which opened in March 2024. Over the past 50 years, the business has grown to offer a broad suite of over 100,000 products principally supplying the professional installer market with both appliances and ancillary products. Over 50 per cent of its sales comprise high quality private label brands such as Mundoclima in air conditioning and Escoclima in ventilation. The existing management team will remain in place, supported by Mr. Salvador Escoda Forés as Honorary Chair, together with a team of over 750 colleagues.

The transaction is expected to be earnings enhancing in its first full financial year following acquisition and to deliver an attractive return on invested capital in the medium term. Grafton intends to support Salvador Escoda in its brand development, ongoing organic expansion and, in due course, the execution of inorganic opportunities in the fragmented Iberian marketplace.

Commenting on the acquisition, Eric Born, Chief Executive Officer of Grafton Group plc, said today:

"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. 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. We look forward to working with the highly experienced and successful team to build on their rich heritage and accelerate what has been an impressive 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."

¹ On a post-IFRS 16 (leases) basis, the estimated adjusted operating profit for the year ended 31 December 2023 was €17.6 million and the estimated capitalised value of leases at 1 July 2024 was €39.0 million.
² Source: Euroconstruct 97^th Summary Report (Summer 2024 Forecast).