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Fletcher Building is unlikely to buy Australian plumbing and building materials business Crane because it does not fit in with its expansion strategy, financial observers say.
Speculation that Fletcher is preparing a takeover of ASX-listed Crane Group has sent shares up 17c since Thursday. Last night, they closed up 2c at $10.32. Fletcher's share price has climbed 27c in the past month.
Crane controls a large segment of the commercial and domestic plumbing business. Its New Zealand brands include Mico Plumbing & Pipelines.
One Auckland fund manager said the takeover suggestion came from a single Australian investor with a large stake in Crane. "It's someone speculating their own story, pushing the virtues of their own stock."
An analyst had doubts about Fletcher's interest in Crane, but for other reasons. "It's highly unlikely Fletcher would want to be involved in any hostile takeover action."
Fletcher's style of acquisition was not to buy NZX or ASX listed entities, but to target privately owned businesses with synergies which helped expand its own businesses, he said.
The fund manager said the rumours had pushed up the shares. But they were also sparked by market knowledge that Fletcher could borrow $1.5 billion for an acquisition because it has $1 billion in credit facilities established and the potential to raise a further $500 million in new equity.
Crane, trading at A$13.05 ($14.88), has a market capitalisation of A$793.9 million and in the year to June 30 had sales revenue of A$1.94 billion.
Crane owns Mico, a New Zealand plumbing products business which has 38 branches here and dominates the sector with its large distribution network. Mico is also a specialist supplier of pipes and fittings used on large building, civil infrastructure and agricultural projects.
Crane owns other specialist businesses in New Zealand, including the 30-branch Corys Electrical business, the 50-branch MasterTrade plumbing and electrical supplier and safety equipment supplier Equipsafety.
Mico's name stood for Metal Import Company when it was started in 1945.
Crane's products include copper tubes, aluminium and copper alloy rod and bar extrusions, stainless steel plates, sheets and coils and aluminium rolled strips and sheets.
Builder distances share price from takeover talk
Fletcher Building's chief executive, Jonathan Ling, is attributing the company's recent share price rise to a combination of three events - which have nothing to do with Crane Group.
He cited firstly a re-rating of Fletcher to bring it into line with the market sector and the conclusion of a number of events, including holding its annual meeting in Auckland.
The second was a tour this month when Fletcher executives, including chief financial officer Bill Roest and Ling, took 20 fund managers and analysts to its Western Australian operations.
Representatives from Macquarie, ABN Amro, Deutsche Bank, ForsythBarr, UBS and Accident Compensation Corporation were among those on the tour, Ling said.
They looked at the operations of Fletcher subsidiaries Rocla, a pipeline and quarry products firm, steel business Stramit and panel-and-benchtop maker Laminex.
This prompted updates on Fletcher by the analysts, Ling said.
The third factor which could have influenced the price was interest in Mexican cement giant Cemex SAB's hostile takeover of Australia's Rinker Group.
WHAT IS CRANE?
* Australian manufacturer and distributor of plumbing and building materials.
* Has major stakes in non-ferrous metal products and plastic pipeline systems.
* Major distributor of plumbing and electrical supplies in Australasia.
* Exports non-ferrous metal products to more than 50 countries.
* Owns Mico Plumbing & Pipelines in New Zealand.
