Builders' alliance seeks €3m to buy DIY suppliers

An alliance of 65 builders' providers is seeking to raise €3 million from other industry players to buy independent home improvement, DIY and construction materials businesses in the Republic.

Associated Hardware (AHL), a co-operative of builders' merchants, is establishing a fund to buy independent operators in what it says is an attempt to halt the growth of the big chains in the sector.

The new fund will be called Elmfield Investments plc and will be 48 per cent controlled by AHL.

It is asking investors for a minimum of €50,000. Under the proposed structure, AHL will hold 48 per cent of Elmfield and the investors will share another 48 per cent. However, none of them will be allowed to own more than 10 per cent individually.

AHL intends setting aside the remaining 4 per cent of Elmfield and using it to provide an incentive scheme for the managers it hires to run its businesses.

It is seeking to raise €3 million from other independent operators in its sector which it wants to use to buy out owners of existing DIY/builders' supplies outlets who want to sell up. Once it has raised the €3 million, AHL will match this sum, and Elmfield will borrow the rest of the cash needed from the banks. It intends securing those debts on the businesses it buys.

The group is forecasting a pretax return on investments of 17 per cent per annum over 15 years. It will operate separately from AHL.

A spokesman yesterday said that the scheme was designed to create investment opportunities for independent players in the DIY/builders' supplies business, and to give anyone who wanted to leave the sector an opportunity to sell their operations.

"The businesses will continue to be run as independents," he said. "People who have built up these businesses may want to sell them but may not want to see them become swallowed up by one of the big, multiple chains."

The market is worth over €3 billion a year, but is increasingly dominated by larger chains. In 2005, Woodies and Atlantic Homecare became part of the same group when their owners, Grafton and Heiton, merged.

AHL began trading in 1972 when independent builders' providers formed a co-op, initially to increase their buying power. It now has 65 shareholders who operate under the Homevalue Hardware brand. Last year it had a turnover of close to €200 million.