DCC has agreed to buy Chevron's UK fuel and oil distribution business for €27.5 million in cash, the company confirmed today.
The business, which currently trades under the Texaco brand, will have a "modest" contribution to DCC's profit in the current financial year, which ends March 31st 2009, but DCC said it should improve "significantly" next year.
The Texaco business currently sells about 1 billion litres of oil each year to 100,000 customers located mainly in southern England and Wales. DCC sells approximately 3.2 billion litres of oil in Britain each year.
"The acquisition of the Texaco distribution business will bring significant further scale to DCC's oil distribution business in Britain and is consistent with our strategy of growing our presence in this market," said Tommy Breen, chief executive of DCC.
As part of the deal, DCC will also enter a long-term supply arrangement with Chevron.
The transaction is expected to be completed by the end of August.
In a research note issued this morning, NCB stockbrokers said the deal was attractive and would help grow DCC's footprint in the UK.
"DCC has a record of buying well and generating returns of 20 per cent plus from investments in the sector. This is no exception," said John Sheehan, NCB. "A very modest contribution to earnings is expected in the year to March 2009 but the deal should boost earnings per share by circa 2 per cent or 3 cent plus in the year to March 2010."
