Crane deal a gamechanger, says Fletcher chief

Fletcher Building's chief executive Jonathan Ling. Photo / Natalie Slade

Fletcher Building has acquired 90 per cent of Australia's Crane Group and will move to compulsorily acquire the remaining shares, completing what chief executive Jonathan Ling says is New Zealand's largest on-market takeover of an Australian public company.

Since springing its surprise pre-Christmas raid on the register of the Sydney-headquartered building and industrial products business, the Penrose company has edged towards completing a $1.3 billion deal.

"It's a gamechanger like Laminex was in 2002," Ling said yesterday.

"It starts to give us some real critical mass. We are the biggest building materials business in Australia and New Zealand."

With Crane under its belt, Fletcher has become Australasia's dominant building materials manufacturer and supplier, bigger than ASX-listed Boral, its main Australian rival in the manufacture and supply of building and construction materials.

Ling talked of further expansion and named an audacious $200 million capital expenditure programme for Formica South-East Asia, pushing further into China and Malaysia. Fletcher wants to build at least two new high-pressure laminate plants to make products for new hospitals, hotels, supermarkets and fast food chains including McDonald's and Starbucks.

The Crane takeover changed Fletcher, Ling said. For the first time, more revenue would be generated from Australia than here: 45 per cent compared with 42 per cent in New Zealand.

This week, Fletcher announced it had control 90 per cent of Crane, the level where a bidder can enforce a mandatory buy-out of minority shares.

Crane's shares shot from A$6.90 before the bid in November to A$10.23 yesterday. Fletcher has added about $1.30 a share since springing on Crane, yesterday trading on the NZX at $9.20. It was around $7.90 at the time of the Crane deal announcement.

Fletcher is now included in the S&P/ASX200 Index, drawing more institutional and superannuation fund buyers.

Ling said that once integration was completed in about two years, Fletcher's global employee base would rise from 17,000 to just over 21,000, which observers say puts it on a global footing with Fonterra in terms of staff.

Crane will eventually be delisted from the ASX and its Sydney headquarters integrated into Fletcher's office at Chatswood's Zenith Centre. Crane has about 4000 employees.

Fletcher, chaired by Ralph Waters, once generated almost 90 per cent of revenue here but has become increasingly internationally diversified.

"There's a lot of shattered nerves because we started in November so it's just been a very sustained effort and these are not easy things to do. At A$960 million-A$970 million, it's our biggest acquisition, bigger than Laminex and bigger than Formica," Ling said. "We like being pioneers."

Analysts praised the deal, drawn to Crane annual revenues of around A$1.9 billion and almost immediate benefits for Fletcher's balance sheet, projected to push revenue up from about $7.1 billion to just under a projected $10 billion in the year to June 2011.

Ling rejected any immediate Crane closures. "Our view is to have a look and do due diligence from now on but we'll become number one in Australia and New Zealand in plastic and concrete pipes," he said.

The plastic pipe market had big potential, crucial in big Australian irrigation projects, encasing fibre-optic cables for broadband and in the energy sector to take coal seam gas from the resource to distribution, Ling said.

He added that the 220-branch Tradelink retail network would enable Fletcher to sell more Laminex, Stramit, Oliveri and Rocla product and was a key to distribution in Australia.