September 3, 2019 / 6:26 AM / 13 days ago

Ferguson to split off UK arm, new CEO to focus on U.S.

(Reuters) - Plumbing parts distributor Ferguson Plc (FERG.L) named the head of its U.S. business as its new chief executive on Tuesday and said it would separate off its UK operations to focus squarely on its largest market in the United States.

The moves, which pushed shares in the UK-based company as much as 3.7% higher, come after billionaire activist investor Nelson Peltz’s Trian fund took a 6% stake in Ferguson.

Sky News reported in July that the fund was urging Ferguson to sell UK business Wolseley and move its London stock market listing to New York.

Ferguson, which generates about 80% of its revenues in the United States, said CEO John Martin was stepping down and would be replaced by U.S. operations chief Kevin Murphy from Nov. 19.

“Ferguson will now become a fully North America-focused business,” the company, formerly known as Wolseley, said.

“The rationale for the demerger is to simplify the group and to allow both businesses the ability to concentrate on customers in their own market,” it added.

At 0820 GMT, Ferguson's shares were up 2.1% at 6,274 pence, topping the UK's benchmark FTSE-100 index .FTSE. The stock earlier touched 6,370 pence, its highest in almost a year.

Ferguson, which operates from over 1,400 locations in the United States, said it was also considering the “most appropriate listing structure” for the group.

“We expect that the North American business will seek a U.S. listing, with Wolseley UK remaining in the UK and a likely target for the bigger domestic merchant companies,” Davy Research analysts wrote in a note to clients.

Ferguson’s performance has been under pressure this year as growth in the United States has slowed. It announced a $500 million (407.27 million pounds) share buyback programme in June after reporting third quarter sales fell short of targets.

“Given the UK’s diminishing importance for the group in recent years, and the tough nature of the market, we do not see either announcement as surprising, but the timing is much earlier than expected,” analysts at Jefferies said.

Reporting by Justin George Varghese in Bengaluru; Editing by Sriraj Kalluvila and Mark Potter

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