Fletcher Building launches hostile takeover bid for Steel & Tube

Wednesday, 3 October 2018

Steel & Tube's board says Fletcher Building is offering too low a price if it wants to buy its business.

The embattled construction firm has proposed to acquire all the construction supplies company's shares at a price of $1.70 each.

'Fletcher Building's preference is to work constructively with the board of Steel & Tube to progress the proposal,' Fletcher Building said in a statement.

'To this end Fletcher Building has been in confidential discussions with the board of Steel & Tube and a number of their major shareholders over the last three weeks.

Ross Taylor said the offer was a good price for Steel & Tube shareholders.

* Fletcher Building posts $190m loss as costs rise**

'Through this process shareholders, who collectively own more than 20 per cent of all Steel & Tube shares on issue, confirmed their position that the board of Steel & Tube should, in good faith, progress the development of the proposal with Fletcher Building, with a view to it being put to Steel & Tube shareholders.

'Given the strong shareholder support to date, Fletcher Building intends to continue discussions with Steel & Tube shareholders and board, with a view to reaching an acceptable outcome in the immediate future.'

Steel & Tube said its board had carefully considered the offer but did not support it, because the $1.70 undervalued the company.

Chair Susan Paterson said: 'The fact that Fletchers has made this indicative offer speaks to our reputation and the strength of our business. Obviously Fletchers sees a lot of value in our business and its future potential as the benefits of our turn-around strategy start to become clear… as do we.'

Steel & Tube recently reaffirmed its FY19 guidance of earnings before interest and tax of $25 million.

Fletcher Building said the acquisition of Steel & Tube was consistent with its five-year strategy.

Fletcher chief executive Ross Taylor said 'An acquisition of Steel & Tube is a unique opportunity to create the leading steel distribution business in the New Zealand market. We believe that there is a significant ability to leverage our business model and people across the combined business for the benefit of our customers, employees and shareholders.

'In particular, we believe customers would benefit from an improved service offering and distribution network, broader product range, and investment in innovation. We consider there to be potential value creation over time as benefits of the combined operation are realised, providing us with the confidence to present an attractive proposal to Steel & Tube.'

The $1.70 share price was a 35 per cent premium on the five-day volume weighted average on the NZX.

'We believe this is a compelling proposal for Steel & Tube shareholders, representing a significant premium to recent share price trading and broker valuations. If successful, the proposed transaction has the ability to deliver significant value to Steel & Tube shareholders and materially de-risk the turnaround plan that Steel & Tube management are beginning to embark on,' Taylor said.

The proposed transaction would require clearance from the Commerce Commission.