Fletcher purchase excites investors

Investors yesterday stamped their approval all over Fletcher Building's latest big buy in Australia - the acquisition of building products group Amatek.

First, sharebroker Goldman Sachs JBWere disclosed it had sold 20 million shares in the company to institutional investors at $7.05 each, raising $141 million towards the $579 million purchase price.

Significantly, the issue was at only the slimmest discount to the last closing price, Monday's $7.07, and compared with a floor of $6.75.

"You have to admire a company that can get a placement away like that," said ASB Securities broker Stephen Wright.

"The drums were beating that there was strong demand."

Fletcher Building chief executive Ralph Waters said the placement was a further vote of confidence in the company and the diversification strategy that had led to acquisitions such as Amatek.

Rickey Ward, of Tyndall Investment Management, said: "It sends a signal that shareholders are happy to back management's call that this asset will prove to be a beneficial purchase."

Then, when trading in Fletcher Building resumed after a two-day halt connected with the Amatek buy, the shares raced as high as $7.41 before closing at $7.21 for an increase of 2 per cent in a day.

"It's a rocket," said one investment banker. "Ralph can do no wrong."

Fletcher Building says the Australian acquisition will boost earnings immediately, making the company Australia's largest maker of fibreglass insulation, and adding steel and concrete assets.

Fletcher's share price has soared by 74 per cent in the past 12 months as demand from commercial building projects has buffered earnings from a home-building slowdown.

Waters "has proved a very canny buyer as far as assets go", said Andrew South, of institutional investor Brook Asset Management.

"It's a good deal," said South, with "good synergy benefits and good market positioning for Fletcher Building going forward, particularly in insulation."

The company expects to save A$4 million from shutting Amatek's head office and expects annual savings in the insulation business - when paired with Fletcher Building's own insulation business - to be about A$6 million.

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