Ferguson PLC (LON:FERG) have told the market about their intentions to list in the United States following a planned demerger of its UK and US business.
Ferguson stated that they see New York as the US businesses’ “natural long-term listing location”. As a result, shares have jumped on Tuesday morning.
Shares in Ferguson trade at 7,334p (+6.29%). 4/2/20 11:09BST.
The FTSE 100 listed company announced that it will be commencing a $500 million share buyback plan over the next twelve months, to allow it to meet its long term growth targets.
Ferguson added that strong cash generation coupled with added opportunities to invest in organic growth and acquisitions means that the firm has resources and cash available for investment.
Interestingly, when considering its future strategy, the plumbing and heating company said that its capital allocation priorities remain unchanged.
Investment priorities continue to be through organic growth which will exceed underlying market growth, which in turn will fund their ordinary dividend.
Plans of a demerger of the UK and US businesses surfaced last year, and today the firm has said that following the separation of the two segments they will be listed on different exchanges – this will allow complete independence and stop shareholder conflict.
Ferguson told the market that it is considering two options for a listing program for the future.
The first involves seeking shareholder approval for an additional listing of ordinary shares in the US, this would mean that Ferguson would seek an additional listing of its shares on a major US stock exchange whilst maintaining its existing premium listing on the London Stock Exchange.
If this plan is to go forward, the firm would require shareholder consent of 75% and even if this passed Ferguson would require a separate shareholder vote to cancel its London premium listing.
The second option is to seek shareholder approval for a primary listing in the US. Ferguson would seek a change of primary listing of ordinary shares to a major US stock exchange.
The FTSE 100 lister said it expects to make a further announcement following the conclusion of the consultation, likely to be in the spring of 2020.
Commenting on the proposals Geoff Drabble, Ferguson’s Chairman said:
“In assessing Ferguson’s future listing structure, the Board’s approach has been to consider carefully what is in the best interests of the Company and its stakeholders over the long-term. The Board believes that Ferguson’s natural long-term listing location is the USA but it is mindful that this is a complex issue for many of our existing shareholders. We will now commence a period of further consultation with our major institutional shareholders and will listen carefully to their feedback before setting out any firm proposals in the Spring.”
Ferguson slips in December
In December, the firm saw their shares in red despite a steady update.
The plumbing and heating products distributor recorded $5.21 billion of revenue in the three months to October 31, up 5.3% on the $4.95 billion seen the year before.
The firm saw its group trading profit rise 9.2% to $451 million in the first quarter, with underlying trading profit which excludes a $18 million accounting boost – rising 4.8% to $433 million from $413 million.
In the United States, revenue rose year on year by 6.1% to $4.89 billion, while revenue in Canada fell 5.8% to $315 million.
Ferguson’s UK revenue dropped 2.2% to $541 million, with trading profit down 17% to $15 million.
The company said its UK demerger is progressing as planned, and is expected to be completed in 2020.
Ferguson are in a period of transition, however there does seem to be a clear planned laid out on the table which should allow stakeholders to voice their opinions.
