Fletcher bid for Crane unreasonable says report

Jonathan Ling, CEO of Fletcher Building, said the company was comfortable with the way the deal was going. Photo / Sarah Ivey

Experts have rebuffed Fletcher Building's A$740 million ($960 million) takeover bid for Australian building and industrial products business Crane Group.

Crane, fighting as the unwilling target of the hostile bid, has released part of an independent expert's report not due out until next week. The report said the Fletcher offer was unreasonable and Crane's shares could be worth as much as A$11.56.

In a combined cash and scrip offer, Fletcher has only bid the equivalent of A$9.35 for every Crane share - an offer Crane's board has recommended its shareholders reject.

Auckland Anniversary Day on Monday is looming as a crunch point in the deal, when the full Ernst & Young Transaction Advisory Services report and the target's company statement will be out. Documents will be mailed to Crane shareholders then.

Crane's early release of the valuation said Ernst & Young assessed Fletcher's offer of A$9.35 a share as "not fair and not reasonable" and reiterated that shareholders should reject the offer, which closes on February 25, as it did not provide a control premium.

"The fair market value of Crane is in the range of A$9.92 to A$11.56 per Crane share (on a controlling and ex-dividend basis)," the report said.

Fletcher's offer is A$3.47 cash and one Fletcher share for each Crane share which, at the time the offer was made, valued Crane at A$9.35.

But the experts noted that the interim dividend announced last Friday had reduced the value of the offer by 22c a share. It valued the Fletcher offer at A$9.05 to A$9.45 per share.

Just before Christmas, Fletcher made its surprise offer, putting pressure on the target's board by also buying a 14.9 per cent stake through a share raid.

Philip King, Fletcher's general manager of investor relations, yesterday defended the price offered.

"On the question of share price, I think the facts speak for themselves. The Crane share price closed at A$7.67 the day before we announced our offer and closed the next day at A$9.40, so there is no doubt that our bid is the reason the Crane share price has traded up," he said.

Jonathan Ling, Fletcher chief executive, agreed and said the company was comfortable with the way the deal was going. If Fletcher did not get a 90 per cent holding, it would have to decide what action to take next and this might include making a further offer, he said last week.

But this did not necessarily mean Fletcher would increase any offer price at any point, he emphasised, describing Crane as a "nice to have" asset rather than a "must have".

If Fletcher succeeds, Australia will be a bigger revenue generator than New Zealand. Fletcher is listed on the NZX and ASX and Ling says its headquarters will remain in Penrose.

Fletcher Building shares closed down 1c at $7.89 yesterday.