$1b bid for Crane wins board over

Jonathan Ling, chief executive officer of Fletcher Building. Photo / Sarah Ivey

Fletcher Building has finally won approval from the board of its takeover target - Australian-based plumbing supplies and plastic pipe maker Crane Group - after increasing its offer by $57 million.

New Zealand's largest building products supplier upped its bid to A$797 million ($1.02 billion) yesterday after being spurned by the company in two earlier attempts.

Fletcher and Crane had been in discussions over the weekend after both companies were placed on a trading halt on Thursday.

Fletcher's shares yesterday fell 16c to close on $7.73 after the halt was lifted.

James Smalley at Hamilton Hindin Greene said it was typical for the share price of a bidder to fall when a bid was raised, particularly when it had a scrip element.

He said the market had taken the announcement in its stride and trading indicated that "this is it" for the takeover.

Earlier some brokers had argued that Fletcher Building should not raise the bid because the synergies between the two companies were uncertain.

The new offer is for one Fletcher Building share and A$3.50 cash for each Crane share. Crane was also to pay A50c a share as a fully franked special dividend.

The total implied value to be received by Crane shareholders including the special dividend was A$10.07 a Crane share.

The previous Fletcher Building offer had been priced at A$9.35 a share and comprised A$3.47 cash and one Fletcher Building share for every Crane share, 4 Australian cents more than its initial December 15 bid.

"We look at the improved payout being an efficient way to maximise value for Crane shareholders," Rob Mercer, an analyst at Wellington-based Forsyth Barr, said.

"By doing this, they've given it a greater chance of getting a quicker outcome."

Fletcher wants to buy Crane to expand in Australia, a market seven times the size of its own, as the nation's commodity exports and economic growth stoke construction.

Crane, which operates in both countries, sells pipes and plumbing products that complement Fletcher's business.

"We have been able to reach agreement on the terms of a revised offer to Crane shareholders which has the unanimous support of the Crane board of directors," Fletcher chief executive Jonathan Ling said yesterday.

Crane chairman Leo Tutt told the Australian stock exchange that the group unanimously recommended shareholders accept the revised offer in the absence of a superior proposal.

Each director intended to accept the bid in relation to any shares they owned or controlled.

Tutt said the reasons for the recommendation would be set out in full, along with other details of the revised terms in Crane's target company statement.

Crane had been scheduled to release the statement yesterday and had received an extension until February 7.

"Crane Group continues to recommend that shareholders take no action in relation to the revised offer until they have considered the target's statement."

The revised bid is still subject to regulatory approvals and to Fletcher Building getting at least 90 per cent of the shares.

Fletcher will fund its increased cash offer from existing bank facilities. The revised bid is conditional on Crane dealing exclusively with Fletcher "in the absence of a superior proposal", it said.

The acquisition is priced at about 20.6 times estimated fiscal 2011 earnings and an enterprise value/earnings before interest and tax multiple of 12.6 times, based on guidance for Crane's full year results, Fletcher said.

Crane shares closed up A38c on A$9.96.