Sharecast - Lords said on Monday that there was "strong growth potential" and synergies achievable from Chiltern Timber operating within the wider group, given the ability for it to cross-sell into its existing customer base.
The AIM-listed expects the acquisition to be earnings accretive from completion and achieve a "strong" return on capital employed.
Lords added the acquisition will be funded from existing facilities, with £1.17m payable on signing and a further £475,000 deferred equally over 12, 24, and 36 months on a contingent basis subject to the business meeting certain earnings targets.
Chief executive Shanker Patel said: "We are delighted to announce the successful acquisition of Chiltern Timber and are also really excited to welcome their ten colleagues to the Lords Group family.
"The acquisition is complementary to our existing Lords Builders Merchants business and will increase our customer base, broaden our product offering and enhance our UK geographic coverage."
As of 0915 BST, Lords shares were down 3.32% at 66.22p.
Reporting by Iain Gilbert at Sharecast.com
