The owners of Wolseley Plc, the British-based parent of Stock Building Supply, approved today a proposal to raise 1.05 billion British pounds ($1.5 billion) through the sale of new shares. The move is designed to help the company avoid defaulting on loans that have been strained in large part due to Stock's enormous losses in recent years.
Wolseley announced March 6 that it is seeking a joint-venture partner in Stock, and that if it doesn't find such an investor by Aug. 1 it will exit the company. Stock provides 10% of Wolseley's worldwide revenue.
In the six months through Jan. 31--the first half of its current fiscal year--Stock's revenue fell 25.5% to $1.34 billion, leading the company to record an operating loss of $129 million.
"Given the recent further deterioration in market conditions, the directors have decided toproceed to exit the U.S. building materials business (Stock) a move that will conserve cash, reduce losses and strengthen the Group's overall financial position during the current economic downturn," Wolseley said in its March 6 news release. "A number of third parties have recently expressed an interest in the possibility of acquiring part or all of the Stock business. A disposal process has now commenced and is expected to be concluded over the next few months. The directors' preference is to structure any potential transaction in such a way as to enable shareholders to participate in the long term value potential of the business, while ensuring Stock's operating losses are deconsolidated as well as conserving cash. Should the current disposal process not proceed the directors have committed to exit the business by 1 Aug. 2009."
Raleigh, N.C.-based Stock in its fiscal first half has closed 83 branches and slashed headcount by 4,330. Stock now has only about half the employees it had 18 months ago. In July 2008 it had 285 locations; now it has 202. (See map and spreadsheet.) In addition, four distribution centers have been closed.