UPDATE 1-DCC eyes further expansion of energy division after Esso deal

Thu Aug 28, 2014 7:26am EDT

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(Adds CEO comments, analyst notes)

By Li-mei Hoang

LONDON Aug 28 (Reuters) - Support services group DCC said on Thursday it saw further opportunities to expand its energy division after agreeing to buy Esso's motorway retail network in France, its biggest ever acquisition, for 84 million pounds ($139 million).

Chief Executive Tommy Breen told Reuters he planned to grow the company's energy business over the coming years and hoped for a 15 percent return on investment from the new business.

"We want to and can envisage developing a business in a number of countries and we currently operate in a wider energy business throughout Scandinavia, in Holland, in Austria and Germany," he said.

"We are in a number of markets already and as oil majors divest of more (downstream) businesses, there's just going to be more opportunity. We have to react to those," he added.

The company said it had agreed in principle to acquire Esso's 274 unmanned petrol stations, 48 motorway concessions and supply contracts, which would give it a 4 percent share of the French market.

The FTSE-250 firm has spent around 1.1 billion euros over the past 10 years on acquisitions and investments as part of its wider strategy to build a larger presence in the transport fuel sector across the United Kingdom and Europe.

It is the company's first acquisition in France and second major deal in the European unmanned retail petrol station market, following its acquisition of Sweden's Qstar in February.

The deal is expected to complete in the first half of 2015 and would see DCC operate the stations under Esso's brand.

Breen said the company had spent 90 million pounds this year on acquisitions so far and that it aimed to spend around 150-200 million each year.

Shares in DCC were up 1.4 percent to 3,507 pence by 1107 GMT.

"We have increased our earnings estimates for 2015/16 and 2016/17 on the back of today's announcement that DCC has agreed to acquire Esso's unmanned and motorway retail petrol station network in France," said Panmure analyst Gert Zonneveld.

"The acquisition should initially enhance group earnings per share by around 10p on a full year basis. We retain our Buy recommendation," he added. (Editing by Neil Maidment and Mark Potter)

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