Grafton, the Woodies DIY group, has increased its stake in rival builders merchanting firm Heiton Holdings, the Atlantic Homecare company, to 8 per cent from 5 per cent. Grafton said it now holds 3.77 million shares in Heiton, representing 7.99 per cent of the group's share capital.

When Grafton announced last month that it had taken a 4.9 per cent stake in Heiton, it fuelled speculation that a major rationalisation of the Irish building materials industry was in prospect. But at the time, Grafton's chairman, Mr Michael Chadwick, said the purchase of the 2.3 million Heiton shares was "for investment purposes".

A Grafton spokesman declined to comment on the higher shareholding, but the move has added to conjecture that Grafton may be laying the foundation for a full bid for Heitons.