Fletcher deal a snip at $582m

Fletcher Building effectively gets an 11 per cent discount on its A$530 million ($582 million) purchase of Australian building products group Amatek because of tax losses in the company, says chief executive Ralph Waters.

He said a conservative valuation of the losses was A$60 million - effectively cutting the purchase price to A$470 million.

Initial reaction from investors to the buy - announced yesterday with the company in a trading halt - was favourable but analysts were waiting for more details to be revealed at a briefing today.

Fund manager Rickey Ward, of Tyndall Investment Management, a Fletcher shareholder, said Waters had "a very sound track record of buying companies at prudent multiples and rewarding shareholders for supporting him".

The deal makes the building products company Australia's biggest maker of fibreglass insulation for homes and factories.

Investment bank Goldman Sachs JBWere is today running a "book build" where investors will bid for 20 million Fletcher shares in a sale expected to pay for about A$125 million of the buy.

The rest is funded by bank debt.

After the share placement, the company's debt to equity ratio will be about 47 per cent, compared to the previous 38.7 per cent.

Amatek has annual sales of about A$743 million and Waters said its purchase would immediately boost earnings.

Waters' third Australian acquisition in as many years is to reduce dependence on New Zealand's construction industry by expanding in a market almost eight times larger.

Waters said Australia's contribution to Fletcher's sales would rise to about 35 per cent from 25 per cent.

Amatek's Insulations Solutions unit makes Pink Batts and foil insulation.

The four Amatek businesses reported an operating profit of A$77 million in the year to June.