Potential buyers line up for Fletcher Building businesses

Fletcher Building says it has received inquiries from parties interested in its businesses, including its construction division, after the company’s announcement of a strategic review.

“The company advises that no decisions have been made to sell any of its businesses,” Fletcher Building said in a short statement to the NZX.

More details of the outcomes of the strategic review would be provided at the company’s investor day on June 24, it said.

Shares in Fletcher Building rallied by 14c, or 6.65%, to $3.15 on the announcement.

The company, in which Australian fund manager Allan Gray has an 18.73% stake, has a market capitalisation of $3.24 billion.

Fletcher Building, which has extensive interests in Australia and New Zealand, has suffered from a string of setbacks - many of them relating to delays in construction of SkyCity’s NZ International Convention Centre (NZICC) in Auckland.

This month, the company advised that SkyCity had launched legal action against its unit, Fletcher Construction, regarding the long-running project.

The risk of a dispute with SkyCity over delays and costs associated with the NZICC had been flagged in previous disclosures.

Last month, Fletcher Building forecast savings of about $15 million from an Australian divisional restructuring and a review of the company’s corporate structure.

As part of its ongoing strategic review, the company said its Australian division would be axed as a standalone unit.

Fletcher would create two new transtasman divisions: light building products and heavy building materials.

The first would include most of the company’s New Zealand building products businesses - Comfortech, Winstone Wallboards, Iplex, Laminex and Wood Products combined with Australian businesses Oliveri Australia, Iplex Australia, Laminex Australia and Fletcher Insulation from the former Australian Division.

Salt Funds managing director Matt Goodson said any prospective buyer of the company’s businesses would face a range of legacy issues.

“Normally, at this part of the cycle, Fletcher Building would be firmly in the sights of a lot of investors as a beneficiary of a potential cyclical upswing,” he said.

“The rural economy is booming and there are two quarter-point Official Cash Rate cuts in the spout, which have yet to feed through into activity but which will do in due course,” he said.

He said it would be surprising if the construction division changed hands, given the litigation surrounding it.

“There would have to be very strong warranties around that, but we will just have to wait until June 24 [investor day],” he said.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.