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Ferguson plans separate listing for former UK parent Wolseley

The plumbing and heating supplier said the demerger will enable both US and UK arms “to focus on accelerating the execution of their independent plans, providing clear investment propositions for each business”

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Ferguson PLC (LON:FERG) plans to spin off its UK operations as a separately listed company and is examining stock market options for its ongoing US business.

The plumbing and heating products supplier’s repositioning towards North America was further enforced as chief executive John Martin will in November be replaced by current US CEO Kevin Murphy, who was promoted after a decade-long stint as chief operating officer.

Martin said the demerger of UK-based Wolseley, the original core of the business, from Ferguson will enable both business “to focus on accelerating the execution of their independent plans, providing clear investment propositions for each business”.

In the group's last full financial year, 80% of total sales and more than 90% of trading profit came from the US, with the UK providing 12% and 5% respectively.

While relatively small in comparison, Martin felt that Wolseley UK has a “strong market position, leading customer propositions and an experienced management team with significant opportunities for development in the large and fragmented plumbing, heating and infrastructure markets”.

As for its current London listing, the board is “considering the most appropriate listing structure” and promised to further consult with shareholders as it would need the approval of 75% of shareholders to effect a full re-listing to the US.

Broker Peel Hunt said comparisons with US peers such as Watsco, Home Depot, Lowes and Fastenal "will increase and be helpful in terms of valuation".

Helped by a weak pound and support from activist investor Nelson Peltz's Trian vehicle, Ferguson shares have risen almost a quarter so far in 2019 and, with the pound lurching even lower on Tuesday, were up 2% to 6,280p.

Analysts at UBS said they think the UK de-merger "is not that relevant" in the context of the size of the group.

"It's not obvious to us that the sale/de-merger of the UK was or is necessary to consider a new listing structure... We think the company is now more open to this than before and under a US-based CEO the willingness to re-list may increase. However, with this being a shareholder decision it is not a forgone conclusion."

-- Adds broker comment --

Quick facts: Ferguson PLC

Price: 6388 GBX

LSE:FERG
Market: LSE
Market Cap: £14.53 billion
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