Fletcher shares spike on takeover talk

Fletcher Building’s share price lifted 11 per cent yesterday on speculation that Australian conglomerate Wesfarmers had bought a small stake in the troubled construction firm.

The shares were trading at $6.52 yesterday morning, up 68 cents on the previous day’s closing price.

On April 5 Fletcher shares hit $5.76, their lowest level since 2009.

According to sources, Wesfarmers has bought a stake of about 4 per cent in Fletcher.

Craigs Investment Partners head of private wealth research Mark Lister said Fletcher was a promising candidate for a turnaround investment.

If the rumours were true Wesfarmers would be attracted to Fletcher due to its own history of flipping around businesses, he said.

‘‘Wesfarmers has a track record of buying businesses and getting them back on track. Fletchers does fit the bill in some ways as it’s a company that has a good future and a lot of good business units, but is completely unloved by the market because of some horrendous errors of judgement.’’

Fletcher has been in strife in recent months after delays and cost blowouts at 16 major construction projects. It was forced to enter an extended trading halt in February to finalise the extent of the losses ahead of a market update.

Fletcher’s share price has fallen 45 per cent since January 2017, and it is considering selling assets as part of a business-wide review.

Wesfarmers announced recently that it would sell its Coles supermarket business this year, which had put the company on the lookout for its next opportunity.

Coles had been a weak competitor in the Australian supermarket duopoly against Woolworths before Wesfarmers bought it about 10 years ago and whipped the business into shape, Lister said.

‘‘Where there’s smoke there is fire. There is probably some truth to the fact that they’ve been looking at Fletchers and that they’ve thought about it,’’ he said.

But a spokeswoman for Fletcher Building said the construction company was not aware of a shareholding in the name of Wesfarmers on its share register.

Fletcher is dual-listed on the Australian and New Zealand stock exchanges and is one of the largest listed companies in New Zealand.

It has assets on both sides of the Tasman, about 21,000 employees and a market value of $4.1 billion.

Hamilton Hindin Greene retail analyst Grant Williamson said it was likely that if Wesfarmers was eyeing Fletcher it would start off with a small holding. ‘‘Until they go over 5 per cent they don’t need to declare it to the market.’’

Wesfarmers is one of Australia’s largest companies. It has businesses in industries including retail, insurance and oil and gas.

Fletcher’s business includes making building products, under the brands Winstone Wallboards, Altus aluminium, and the road barrier supplier Australian Construction Products.

It also has a number of retail brands selling trade and plumbing supplies including Tradelink, PlaceMakers and Calder Stewart Roofing, which could complement Wesfarmers’ Bunnings chain.

Neil Paviour-Smith, managing director of investment management firm Forsyth Barr, said Fletcher’s long history and dominance in the New Zealand market could create political risk for a takeover.

‘‘It’s something that Wesfarmers will be thinking about very carefully.’’ –with Sydney Morning Herald