Fletcher Building has paid $315 million for Higgins Group Holdings, New Zealand's third-largest road construction and maintenance company, while separately announcing it will restructure into five divisions.
The Higgins deal involves its road construction and maintenance operations in New Zealand, including asphalt and bitumen plants, road construction and maintenance operations in Fiji, aggregate business including 16 operational quarries, and other related businesses including the manufacture of traffic signs and bitumen tanks and sprayers. Excluded from the deal are Higgins' ready-mix concrete and property businesses.
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Fletcher Building chief executive Mark Adamson said he had signalled for some time a desire to expand into road construction and maintenance which the company sees as a significant opportunity. Higgins was an obvious choice, he said, as Fletcher had already partnered with it on road construction projects for the past 25 years.
Higgins recorded $391 million in revenue and underlyling operating earnings of $35 million in the 2015 financial year and is expected to generate earnings before interest and tax of $40 million in 2016. The acquisition is being funded from existing cash and debt facilities and is conditional on a number of factors including Overseas Investment Office and Commerce Commission approval.
Last week Fletcher announced it had approval from the Australian Competition and Consumer Commission and the Foreign Investment Review Board for its sale of Rocla Quarry Products to Hanson Construction for a post-tax profit of $85 million which will be booked in the 2016 financial year.
Fletcher said changes to its business portfolio, including the purchase of Higgins and sale of Rocla, required a new structure which will see the business organised into five divisions.
Building Products will be led by Matt Crockett who is currently chief executive of the Heavy Building Products division. Francisco Irazusta will head the international division which encompasses the Laminex, Formica and Roof Tiles businesses. The role of chief executive Laminates & Panels has been disestablished and the current incumbent Paul Zuckerman is leaving the business.
Distribution, including building materials, plumbing supplies and steel distribution, will continue to be run by Dean Fradgley while Residential and Land Development will be headed by Steve Evans, the current chief operating officer of Fletcher Living.
Construction will continue to be run by Graham Darlow and incorporate the new Higgins contracting business.
In addition, Lee Finney has been appointed to a new role of chief transformation officer to focus on speeding up growth and cost reduction initiatives.
Financial results for the half year to Dec. 31, 2015 will be reported on the basis of the new divisional structure.
Fletcher Building shares last traded at $7.