Wolseley considers £1bn rights issue

The growing trend since the start of the year is for companies to reach out to shareholders by raising around £28.1bn in rights issues and share placings.

The UK building supplies group Wolseley is the latest company considering convincing investors, as well as banks, to invest a further £1bn cash injection, although it seems as though the market’s tolerance for pumping money into ailing companies is falling rapidly.

The announcement of the potential right issue comes as the Plumb Center and Builder’s Centre builders merchants chains warned that further job cuts may be on the horizon.

In order to fight off the administrators, the company has had to cut the dividend to shareholders as well as cutting its ties to the US market.

In raiding the money Wolseley are likely to do this in a three step process, firstly by raising £270 million by selling 225 million new shares at 120p which is a 27 percent discount on the value they closed at last night.

Wolseley will need to raise the cash in order to reduce the £3bn debt that is crippling the company’s operations since the fall of the property and construction markets since the recession has hit.

After selling new shares the company will carry out a share consolidation, giving shareholders one new share for every 10 they already own as well as hoping to raise £781 million from existing investors with an offer to buy 11 new shares at £4 each for every five of the new shares held.

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