Why Steel & Tube shunned $282m takeover bid

Fletcher Building takeover target Steel & Tube has told shareholders why the board rejected the $282 million bid and how the company is on track to improve the business.

Susan Paterson, Steel & Tube chairwoman, wrote to shareholders saying the company was making good progress with its “turnaround strategy”.

The $1.70/share Fletcher offer undervalued the business and the proposal would face issues under the Commerce Act, she said.

On September 10, Paterson said the board got the non-binding offer from Fletcher and sought expert legal and commercial advice from Chapman Tripp and First NZ Capital.

Fletcher’s approach was unsolicited and unwelcome, Paterson said, but the offer indicated confidence in Steel & Tube’s reputation and the strength of its business.

Fletcher obviously saw value in the company and its future potential, she said.

The Fletcher offer does not prevent higher-value approaches from other interested parties and the board would continue to act in shareholders’ best interests, she said.

The company’s priority now was its turnaround and it was continuing to make positive progress under this strategy, she said.

Fletcher told the NZX last week its preference was to work constructively with Steel & Tube’s board to move its proposal ahead.

Buying the company was in line with Fletcher’s five-year strategy, announced in June, and fitted firmly within its focus on the Australasian building products and distribution sectors, the notice said.

Ross Taylor, Fletcher chief executive, said buying the company would create the leading steel distribution business in New Zealand and there was significant leverage in Fletcher’s business model.