DCC to buy fuel business for £13.5m

Industrial holding group, DCC, has agreed to purchase the Irish fuels business of Burmah Castrol, for £13.5 million. It is already in the oil distribution business through Emo Oil, and the acquisition will expand this business and bring it into the retail petrol market for the first time. This take-over, which is subject to regulatory approval, is in line with DCC's policy of pursuing bolt-on activities. It will provide a "platform" for further growth, said Mr Kevin Murray, managing director of DCC Energy which is making the acquisition. DCC is "not looking at anything at the moment" but is always on the lookout, he added.

Mr Jim Flavin, DCC's chief executive and deputy chairman, said Emo Oil has been achieving strong growth and the acquisition will "significantly increase the scale of DCC Energy's oil distribution activities and will establish DCC Energy in the petrol market". Emo has more than 4 per cent of the distillates (gas oil, diesel and kerosene) market in the Republic and the take-over will increase this to around 8 per cent, according to Mr Murray. Burmah has between 2 and 2.5 per cent of the retail petrol market.

The group noted that the sale of Burmah Ireland by Burmah Castrol plc is part of that group's world-wide strategy to concentrate its activities in lubricants and chemicals. Burmah Ireland owns an oil importation facility in Dublin and sells distillates into the commercial and domestic markets. It also sells petrol and diesel at 130 service stations in the Republic. Burmah owns 8 of these and the remaining 122 are owned and operated by dealers under contractual agreements. These agreements are for 10 year periods, Mr Murray said. He said the take-over will be earnings enhancing in the first year.

Burmah has around £2 million cash which brings the net cash in the consideration down to £11.5 million. Burmah recorded an operating profit of £1.5 million on sales of £23 million in 1997. The consideration represents a premium on the net assets of £8.6 million at the end of last year. Castrol oil does not form part of the acquisition. However, DCC Energy is to enter into a joint marketing agreement which will allow it to distribute Castrol lubricants to Burmah Ireland customers. Emo Oil has sea-fed import terminals in New Ross and Belfast. DCC Energy is also in the liquefied petroleum gas (LPG) market in Ireland and Britain, through the Flo gas brand.