Fletcher plans $750m equity raising to boost balance sheet

Institutional investors welcome the move saying rights issue price ‘compelling’

Fletcher Building wants $750 million of new equity from shareholders, has established $500 million in banking loans to strengthen its balance sheet and is in a trading halt.

The surprise announcement yesterday morning followed the business recently revealing it expected to lose nearly $1 billion on major construction contracts.

“The company is raising $750m through a fully underwritten accelerated pro rata entitlement offer, enabling eligible shareholders to purchase one share for every 4.46 they own . . . for $4.80 per share,” it announced yesterday morning.

That is a 23.4 per cent discount to the closing share price on the NZX on Monday, the company said.

“The offer will comprise institutional and retail entitlement offers, with any entitlements that are not taken up by eligible shareholders and entitlements of ineligible shareholders being offered for sale in the institutional and retail book builds respectively,” it said.

“In conjunction with the offer, Fletcher Building has also established a new standby banking facility of $500m with ANZ, MUFG Bank [Japan’s biggest bank] and Westpac,” it said. The offer and new bank lines would strengthen the balance sheet and enable the business to meet its longer-term strategic objectives, Fletcher said.

New Zealand institutional investors welcomed the moved saying it should put the business in a better financial position and the rights issue price was “compelling”.

“The capital raise will put Fletcher Building on firmer footings to continue to rebuild its operating business,” said Shane Solly of Harbour Asset Management.

“The new lower gearing target looks prudent. The proposed sale of Formica and Roof Tiles reinforces Fletcher’s focus on its core businesses,” Solly said.

The company also revealed yesterday how it plans to sell assets and focus its activities on New Zealand and Australia. That would see Fletcher leave Formica, headquartered in the United States, as well as Hungary where last decade it built a new $20m roof tile manufacturing plant to supply what it said was a strong market.

Fletcher makes lightweight steel tile roofs products in manufacturing plants here, the United States, Hungary and Malaysia.