DCC to buy Brogan Holdings for €47.2m

BUSINESS SUPPORT services group DCC announced yesterday that it is to buy British fuel company Brogan Holdings for € 47.2 million.

This follows its acquisition last month of Yorkshire firm Bayford Oil in a €24.7 million deal, and strengthens DCC’s market leading position in oil distribution in Britain.

The latest addition will bring its market share to approximately 14 per cent, and will increase the scale of its fuel card business in Britain, DCC chief executive Tommy Breen said.

A cash consideration of €47.2 million (net of cash acquired) is to be paid for Brogan, which markets fuel cards under a number of well-known brands including BP, Shell and Texaco.

This values the deal at about six times the operating profit reported by the British business in its most recent financial year.

“We are confident that the integration of Brogans with DCC’s existing oil distribution and fuel card activities will deliver returns on capital broadly commensurate with previous energy acquisitions,” Mr Breen said.

In its morning note yesterday, Goodbody stockbrokers said that in light of the “available synergies”, it expects the return on capital employed to reach 18 per cent to 20 per cent within two years.

Goodbody analyst Dan Cavanagh said that the acquisition of Brogan is “very positive” as it will be immediately “earnings accretive” – ie, it will boost earnings per share, as well as offering “synergy benefits”.

Brogan operates from a network of 15 depots in Scotland and the north of England, employing a fleet of 87 tankers and has 279 employees.

In the financial year to the end of May 2009, the British firm reported an adjusted operating profit of €7.9 million on sales of €329 million.

This comprised 343 million litres of heating and transport fuels sold to domestic, commercial, industrial and agricultural customers, and 104 million litres of motor fuels sold through fuel cards to approximately 10,000 customers.

Gross tangible operating assets were €35.3 million, with net assets totalling €5.3 million.

DCC’s share price bounced 35 cent to €19.60 on the announcement.