Fletcher dumps steel deal
The country’s biggest building company, Fletcher Building, has withdrawn its takeover bid for steelmaker Steel & Tube, shortly after upping its price.
Fletcher raised its offer from $1.70 to $1.90 a share, the New Zealand stock exchange was told yesterday. But hours later, Fletcher said it was pulling its offer due to a ‘‘lack of support from Steel & Tube’s board to progress the proposal in a timely manner’’.
Steel & Tube had said it would take three to four weeks to get an independent valuation of the second offer. It had also told shareholders that both bids were, in its view, too low.
Fletcher Building said it had been ‘‘engaging with Steel & Tube on a proposal for five weeks now, which has provided ample time for the board to seek independent valuation advice’’.
The conglomerate revealed it had received support from key Steel & Tube shareholders Milford Asset Management and Harbour Asset Management.
But the higher offer and a special dividend of 5 cents per share had not been embraced, even though it was ‘‘a significant premium’’ of more than 50 per cent of Steel & Tube’s average share price prior to the offer.
Steel & Tube’s share price closed down 1.33 per cent yesterday at $1.48. The shares hit a yearhigh of $2.06 in January.
Fletcher Building chief executive Ross Taylor said that ‘‘despite offering what we believe was a very attractive offer to Steel & Tube shareholders, our engagement with the Steel & Tube board has been unsuccessful and as a result we have withdrawn the acquisition proposal’’.
Steel & Tube had maintained that, as well as being too low, Fletcher’s offer raised competition issues that might take time to overcome, given Fletcher’s ‘‘vertical presence and significant size in several steel product markets’’.
However, Taylor said Fletcher’s advice was that the transaction would have received Commerce Commission clearance.
Steel & Tube’s advisers, First NZ Capital, said the 5c dividend Fletcher was offering would not compensate shareholders for the time it took to overcome the regulatory hurdles.
It believed the company’s value was closer to between $1.95 and $2.36 per share.
Steel & Tube chairwoman Susan Paterson said earlier yesterday that Fletcher’s higher offer did not prevent higher-value approaches from other interested parties. In the meantime, she said the company would focus on its turnaround strategy.
The Wellington-headquartered company has struggled in the past couple of years with manufacturing problems and pricing pressures from the unexpected demands of the building boom.
It has focused on paying down debt and recently confirmed an earnings forecast of $25 million before interest and tax for the year ending on June 30, 2019.
Steel & Tube was one of several companies taken to court by the Commerce Commission in a crackdown on certified lab testing of steel mesh.
The company has also experienced personnel changes. Former chief executive Dave Taylor left last September, and co-founder Nick Calavrias was killed in an accident last January.