Fletcher Building to buy Tasman Building Products

Fletcher Building said today it had agreed to buy Tasman Building Products Pty Ltd for A$230 million ($260.5m).

Tasman has significant building products operations in Australia and New Zealand, including insulation product Pink Bats, and a small operation in the United States.

"The acquisition is a logical extension of our building products envelope in New Zealand, enhances our Australian position and provides further growth opportunities," Fletcher Building chief executive Ralph Waters said.

Tasman is owned by private interests whose key shareholders are G S Private Equity and Quadrant Capital.

The purchase price will be funded by an underwritten placement of 20 million new ordinary Fletcher Building shares, and additional debt.

At Fletcher Building's discretion, the size of the equity capital raising may be increased to 25 million shares.

Tasman Building Products was a former division of Carter Holt Harvey.

It is a little under a year since Fletcher Building splashed out in Australia with a $754 million deal to buy wallboard manufacturer Laminex Group.

Tasman describes itself as the largest manufacturer and distributor of insulation products in New Zealand and the world's largest producer of steel roof tiles.

It also makes and distributes Australian insulation product Fattbatts and Oliveri stainless steel sinks.

Tasman also claims leadership of the access (raised) flooring market in Australasia.

Tasman's earns 42 per cent of its revenue in Australia, 28 per cent in New Zealand and 19 per cent in the US.

Mr Waters said Fletcher Building had been interested in Tasman for some time as it met all the company's investment criteria -- good industry structure, leading market positions, capable management and attractive financial parameters.

A formal sales process including due diligence was begun in May.

For the 12 months to June 30, revenue for Tasman was A$243 million. Earnings before interest, taxation, depreciation and amortisation (ebitda) was A$40 million subject to final audit.

The Tasman business units will form part of Fletcher Building's building products division, replacing the $300 million of panels revenue recently transferred to its laminates and panels division.

The building division is already a major distributor of Tasman products in New Zealand through franchises such as Placemakers.

"The acquisition enhances our position in Australia and provides greater geographic diversity in our earnings base. Synergies of over $5 million per annum should be fully realizable during the next financial year," Mr Waters said.

Tasman had a number of growth opportunities, he said including the insulation markets due to new efficiency standards.

"We are also excited by the growth prospects for roofing, particularly in Japan, and the wider introduction of the Oliveri sinkware range into New Zealand and the US, where distribution is already established."

The acquisition of Tasman was expected to be immediately positive for earnings per share.

The purchase is subject to approval of the Australian Foreign Investment Review Board.

But the company said it did not require Commerce Commission approval of the purchase.

Fletcher Building shares closed yesterday at $4.27, just 3 cents off its high since it became an independent company in March 2001.

- NZPA