John Fleming & Co has eight outlets in cities such as Aberdeen, Dundee and Inverness. They will become part of Grafton's Buildbase operation, which has over 100 branches in the UK. It is understood the Buildbase subsidiary plans significant investment in the latest acquisition.

John Fleming & Co reported revenue of just under £28m ( 40m) in the 12 months to the end of March and an operating loss of £22.000. The directors reversed a £1.1m operating loss in 2004. They said they had a year of "consolidation and rationalisation" and that the impact of "new management and processes" had helped to "dramatically" reduce the company's losses. John Fleming & Co's parent company, Fleming Holdings, lists property assets with a net book value of £8.3m.

Grafton, which also owns the Woodies DIY chain, releases a trading update this Friday in which it is expected to give details of other bolt-on acquisitions completed within the past couple of months.

Earlier this year Grafton said it would spend up to 50m this year on acquisitions to grow its British business. It bought 17 merchanting operations in the UK last year.

Grafton reported turnover of 2.63bn last year and posted profits of 166m. In May, the company said trading in the UK, where most of its profits are generated, had been "very tough" in recent months.

Grafton also owns the Plumbase and Jackson Building Centres in the UK.