Ling in hot pursuit of Aussie prey

Fletcher Building's boss has a few tricks up his sleeve to win control of a firm he says will bring big benefits. Photo / Sarah Ivey

When Jonathan Ling took a break at Victoria's Sandy Pt, the winds were down. That meant windsurfing was off his holiday agenda.

"It was calm so I fished and got gummy shark, salmon, whiting. It was nice summer weather, temperatures from 24 to about 40C," a relaxed Ling said of his Australian holiday from his Penrose office this week.

But hardly a day passed when the Fletcher Building chief executive was not working for some part of the day, pushing ahead slowly with the largest corporate deal by a New Zealand business for years.

Ling, who is originally from Melbourne, is heading an audacious A$740 million ($966 million) attempt to snare 90 per cent of Australian building and industrial products business Crane Group. This week he admitted that if that much was not under his belt by the close-off date of February 25, all was far from lost.

"We'd have to decide what to do. We've made our offer and that is that; we are sticking to our condition for 90 per cent of Crane. If we don't get to 90, there's all sorts of options but at the moment that's our offer.

"We could decide to take two bites of the cherry: take so much and control the business with more than 50 per cent and then a second takeover. A good example is if you look at how Rank took over Carter Holt Harvey. They got 70 per cent in the first tranche and after 12 to 18 months, bought the rest."

Any two-step process was not predicated on upping the price.

"There's as much evidence of paying less later as paying more later. Take the example of if the sharemarket goes down and the economic outlook becomes grim in the secondary offer."

Last decade's move by Boral to take over Adelaide Brighton is a deal Ling cited; Boral held shares in its target for years, then sold.

Ling's vernacular appears to have changed somewhat in the past month.

"This is a 'nice to have' rather than 'must have'," Ling said twice of the Crane takeover and its progress.

"We feel it's going to plan and we are very comfortable where we are at the moment."

The relationship with Crane was distant but not hostile, he said. "We are not close to them and never have been. It's always been professional and cordial."

Crane does not reciprocate on the feelings front. Leo Tutt, Crane's chairman, called the Fletcher offer "unsolicited and inadequate". He told shareholders to reject it because it undervalued the shares, the timing was opportunistic given Crane's growth prospects and the expected recovery in the housing market, Fletcher was not paying for the substantial synergies and strategic value that Crane could deliver and the offer was highly conditional, not certain and not final.

Reports have emerged of Crane finding ways to thwart Fletcher, including finding other potential suitors in Woolworths, GWA Group and Britain's Wolseley.

Ling cites an army of people working in his camp: Fletcher's chief financial officer, Bill Roest, company secretary and general counsel Martin Farrell and corporate development manager Blair Nelson, executives at Macquarie, Bell Gully in Auckland and Sydney corporate law firm Gilbert and Torbin. Ling says Fletcher's move on Crane has been made easier because about 80 per cent of its register is in institutional hands - a more dispassionate, cohesive and professional group than retail investors - and a card he regards as strengthening Fletcher's hand.

"Institutions are easier to communicate with ... A lot of retail investors are just sitting on their shares."

Greg Sedgwick, Crane's managing director, says 28 per cent of the shares are with retail investors.

The success or failure of the deal rests with institutions such as Crane's single biggest shareholder, Perpetual, which told ASX on January 7 it had 8.5 per cent. Suncorp-Metway and subsidiaries said last month it had 5.4 per cent and Schroder Investment Management Group is a substantial shareholder. Fletcher already owns 14.9 per cent of Crane, which it bought from four institutions.

Ling says Fletcher shareholders will enjoy big benefits from the Crane takeover. "Strategically, it complements our existing Australian businesses. Our strategy has been to expand into Australia and this is the next step. In 2001, when we relisted, we were 100 per cent dependent on the New Zealand economy."

But buying the Laminex Group, Tasman Building Products and Amatek, which brought the Stramit and Rocla businesses, changed that in the last few years to the point where if Ling wins Crane, more of Fletcher will be in Australia than New Zealand. Australian-generated revenue would increase from 34 per cent to 45 per cent.

"Australia has been growing faster than New Zealand in the last decade. Our shareholders always knew the next big move would be into Australia."

Fletcher's December 15 offer document also cites the ability to leverage Fletcher's operating model, satisfying business ownership criteria and attractive financial metrics. But Ling says that after February 25 the success will be scrutinised - "then we will have to see who's accepted and who has not".

January 31 remains a focus date for Fletcher, say analysts on both sides of the Tasman. On Monday, Crane issues its company statement - probably a blistering attack on Fletcher's tilt and a robust defence of Crane's own strategy, profit, path, outlook and expansion plans.

Ling is hoping the climate will stay calm and enhance one of his career's biggest deals, a little like his holiday - if he can't ride the exciting white tips of the surf, fishing yields rich rewards. Ling hopes to catch his Crane.