Fletcher Building boss grilled over takeover bid

Fletcher Building chief executive Jonathan Ling. Photo /Greg Bowker

Fletcher Building's boss faced a series of hard questions at an analysts' briefing today on the massive Crane Group deal.

Fletcher Building has launched a takeover bid for ASX-listed Sydney-based building and industrial products company Crane Group in a deal that values Crane at A$740 million ($983m).

Jonathan Ling, chief executive, was asked to justify paying a big price, after announcing the raid on an Australasian rival.

Those at the briefing said a series of questions were delivered to Ling and not everyone was happy with the responses.

One institutional investor predicted the deal would be extremely difficult and Fletcher might well have to increase its offer to succeed.

They also complained about timing, saying doing this year's largest corporate raid about one week before Christmas went down very badly.

But Philip King, investor relations manager at Fletcher, said this afternoon that couldn't be helped.

"You can't let Christmas get in the way of business, unfortunately," King said.

Crane responded to today's announcement by telling shareholders to take no action.

"The board of Crane will meet as soon as possible to consider the offer and will provide further advice to shareholders at that time," Crane said. It has appointed UBS and law firm Blake Dawson as its advisers.

Fletcher Building today said it had acquired a 14.9 per cent pre-bid stake in Crane.

It was offering one Fletcher Building share and A$3.43 in cash for each Crane share, with the bid conditional on, among other things, the acquisition of 90 per cent of Crane shares.

Based on the Fletcher Building closing share price yesterday, the offer equated to a value of A$9.352 for each Crane share, it said.

That represented a 28 per cent premium to the Crane share price.

Fletcher shares have fallen 3 per cent today, dropping 26c to $7.59.

Ling said the offer was an attractive opportunity for Crane shareholders to both receive cash and become shareholders in a larger and more diversified Australasian building materials manufacturing and distribution company.

Fletcher Building had delivered shareholders a total aggregate return of 435 per cent since it listed as a separate company in 2001 compared to Crane's 93 per cent over the same period, said Ling.

"The combined group will have an enhanced presence and liquidity on both the Australian and New Zealand stock markets."

The Crane businesses were complementary to Fletcher Building's operations in the building materials and trade distribution markets and would enable the company to diversify its presence in Australia to include the plastic pipe and plumbing trade distribution markets.

Fletcher Building said it bought 13.1 per cent of the shares in Crane from institutional shareholders immediately before the announcement date, for A$9.35 cash.

It intended to operate Crane as a separate division within the larger group and employees within Crane's trading businesses would remain in their roles on the same or substantially the same conditions as now.

The combined group would seek to derive savings from a reduction of head office and administrative duplications, and other operating benefits may arise.

The offer would be funded by the issue of 67.3m Fletcher Building shares, totalling A$400m, and bank debt of about A$340m from an existing undrawn bank facility.

The offer needs to meet a range of regulatory requirements in Australia and this country.