Australian media claims buyers are chasing Fletcher Building

Fletcher Building has a large number of government projects including the East Frame housing project in Christchurch.
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Fletcher Building has a large number of government projects including the East Frame housing project in Christchurch.

Australian media have reported that New Zealand's Fletcher Building is fair game for potential buyers.

But at least one analyst here thinks a sale is unlikely. 

The Australian Financial Review said it understood at least three investment banks were on the lookout for buyers as they went "hunting for the next big M&A deal".

Fletcher Building chief executive Mark Adamson has weathered criticism about the downgrade.
CARYS MONTEATH/FAIRFAX NZ

Fletcher Building chief executive Mark Adamson has weathered criticism about the downgrade.

Fletcher's is the country's biggest construction firm and its next biggest rival, Hawkins Group, has just been bought out by Australasian firm Downer EDI.

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The AFR pointed to Fletcher's share prices, which had sunk to a point where they could be considered good value compared to its peers.

Fletcher's shares have fallen from a peak of $11 late last year to $7.86 in Thursday trading. The stock has lost almost $3.00 since January.

Last month the company warned its profit could be up to $150 million less than it had forecast just three weeks previously, due to cost blow-outs on two major projects.

However, analysts in New Zealand said they had heard nothing about a possible buyout.

One said he doubted there were any potential buyers waiting for another company to "add to their strategic footprint". 

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Fletcher's performance compared to its Australian peers was also misleading as they were operating in different markets and under different circumstances.

Grant Williamson, a broker with Hamilton, Hindin, Greene, said there were always rumours when blue-chip companies came under sharemarket pressure.

"It can lead to the possibility of M&A activity. I mean, Fletcher's a pretty big beast and it does make you wonder whether it might be worth more with different divisions being split rather than retaining an overall entity. But I'm really only guessing."

Fletcher Building has been prepared to jettison under-performing companies in the past, including its steel operation to Bluescope and Rocla Quarries in Australia.

But while it only generated a portion of Fletcher's overall income, the construction arm was important to other parts of its business such as building products, Williamson said.

Fletcher Building has been asked for comment.

 - Stuff

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