Analyst Note| Brian Bernard, CFA, CPA |
On Jan. 4, Ferguson announced the sale of its Wolseley U.K. business to Clayton, Dubilier & Rice for approximately $420 million in cash. Management expects the sale to close in January 2021. While we think the sale is a prudent move by the management team, the sale price is modestly below our estimate of the U.K. business's intrinsic value. As such, we’ve decreased our fair value estimate for local shares to GBX 7,300 from GBX 7,500 and ADRs decreased to $10 from $10.10. That said, our U.K. intrinsic value estimate assumes the business stabilizes and returns to previous profitability levels, which could prove optimistic. The fair value of local shares was also unfavorably affected by foreign currency translation.