Shares in Auckland-based Fletcher Building have soared in the last two weeks in the wake of takeover activity in the Australasian building sector, but market observers say the company may not be a sensible target for acquisition.
Fletcher's shares have climbed 53c from $9.27 at the end of
October to close at $9.80 yesterday, a rise Arthur Lim, investment director at Macquarie Equities, said was partly driven by wider sector activity.
Mexico's Cemex SAB, the world's third-largest cement maker, is making a hostile US$12.8 billion takeover bid for Australia's Rinker Group whose shares surged 26 per cent to A$18.59 earlier this month, exceeding the Mexican company's A$17 a share offer.
Lim said Fletcher has long been seen as a potential takeover target and the Rinker bid was a reminder of the possibility. But he warned against Fletcher being compared to Rinker because the two had different growth profiles and operated in different markets.
Another New Zealand analyst said Fletchers was a poor takeover target if a predator wanted to break it up for profit. "The company would be a lot harder to extract value from than people might think," said the Wellington analyst, citing Fletcher's synergies and sector alliances which he said were the very reasons it did so well.
Its large manufacturing base had a natural outlet via its distributor, retailer Placemakers, he said.
Various manufacturing, building and construction divisions benefited from being owned by the same company, he said. Dismantling its divisions in an attempt to make money would be self-defeating, the analyst predicted.
Fletcher's management was also lean so a predator was denied the option of pruning back costs in this area.
"If you look at the traditional ways private equity funds add value, none of those factors exists," the analyst said.
However, other analysts see Fletcher's strong cashflow as a reason for takeover interest.
