KEY POINTS:
Fletcher Building studied potentially problematic environmental issues and the international economic climate before last year's US$700 million purchase of giant industrialist Formica Corporation.
Rod Deane, Fletcher chairman, said environmental risks which were potentially hard to quantify and an external review of North America, Europe and Asia was undertaken before the purchase. The Formica buy has suffered during the collapse of the US property market and the global financial meltdown.
In a document circulated among staff, Deane revealed how the purchase caused controversy within the big organisation.
"We have had the benefit of detailed transaction issue papers and engaged in fulsome debate with a number of the senior management team. We feel confident in the information made available ... that we have a very good understanding of Genus' [codename for Formica pre-takeover] business issues.
"We have in particular considered matters as diverse as:
* External reviews of laminates markets in North America, Europe and Asia.
* Independent reviews of the appropriate cost of capital to be applied to an acquisition such as this.
* Assessments of risks and contingencies identified in due diligence and their valuation.
The quantification of environmental risks in circumstances where the opportunity to undertake a comprehensive testing programme is not available."
