Diploma surges after raising £190m to help fund US acquisition

The company placed just under 11.1m new ordinary shares with institutional investors at 1,711p each.

The £357m acquisition, announced late on Tuesday alongside the placing, is expected to "significantly" enhance earnings from year one and cover the cost of capital. Diploma also said the board was recommending a dividend of 30p for the year to September 2020.

Chief executive officer Johnny Thomson said: "The acquisition of WCW is an exceptional opportunity for Diploma. As a high-quality wire and cable distribution business with a strong management team and an impressive value-add customer proposition, WCW is a perfect fit with our business model.

"Furthermore, it accelerates our strategy of focussing our growth in our key markets in a product area we know well, providing a scalable platform for our Controls sector in the US. The business has an excellent performance track record and is positioned well in high structural growth end segments to deliver exciting growth in the future."

At 1430 BST, the shares were up 23% at 2,098p.

Broker Peel Hunt said: "Whilst there is a lot of data to get through before we update our forecasts fully, our initial reaction is that this is a compelling deal. A new level for Diploma in terms of size, but the fundamentals look as solid as a typical DPLM bolt-on: WCW is a value-add distributor of an essential product in a growth, complementary market, with high margins and solid cashflow.

"Moreover, it strengthens the US footprint for Controls and will likely enable some useful cross-selling over the Atlantic."

Meanwhile, JPMorgan Cazenove upgraded its rating on Informa after the acquisition to 'overweight' from 'neutral', saying it was buying a good business for a reasonable price.