DAVY VIEW

Ferguson seems an unlikely target for an activist investor. The group can hardly be accused of lacking ambition having consistently outperformed US peers both instore and online. At the same time, management has disposed of its entire network in Continental Europe and restructured heavily in the UK. Any proposal to sell that business will not be new to the Ferguson Board. Trian typically takes a long-term view and will almost certainly seek Board representation. Previous investments have targeted leaner cost structures, spin-offs and asset sales. Closing the gap to US peers requires closing the margin gap, so we suspect Trian will target costs and further ex-US asset sales. Talk of US listing is also likely to resurface again.