Fletcher Building's boss has put the case for its $282 million proposed takeover of Steel & Tube, saying it is not only "good value but compelling value."
Ross Taylor, Fletcher chief executive, said: "It makes good economic sense for both parties. It's also good value and I wouldn't be doing it if I didn't think so. It's compelling value for Steel & Tube shareholders - not just good value."
The proposal was also within Fletcher's longer-term strategy, announced in Sydney this year, he said, and extensive discussions were undertaken with the target company.
"We've talked to Steel & Tube shareholders, telling them we'd look at opportunities. We've spoken to the board and institutional shareholders, all done on a confidential basis. When we look at the discussion and proposals, it's quite a compelling one at the price. The premiums we're offering is 35 to 38 per cent on the five-day or one-month average trade," he said.
Steel & Tube shares jumped up 21 per cent on the back of the $1.70 per share offer. The company's shares were trading at $1.56, up 16.4 per cent at around 3pm.
Steel & Tube earlier said the offer "significantly undervalues" the company.
"The fact that Fletchers has made this indicative offer speaks to our reputation and the strength of our business. Obviously, Fletchers sees a lot of value in our business and its future potential as the benefits of our turn-around strategy start to become clear ... as do we," chair Susan Paterson said in a statement.
But Taylor said this afternoon that the offer price was "very good value for Steel & Tube shareholders. We also believe that from Fletcher's perspective, it allows us to create a combined business to better service customers, a full suite of products we can distribute, gives us a better regional footprint and better scale which allows us to invest more in customer service and innovation.
"We're competing against direct international imports but it gives us scale to compete. It's compelling for Steel & Tube shareholders and logical for Fletcher shareholders," Taylor said.
Fletcher had talked to "more than 20 per cent of Steel & Tube shareholders and they are very supportive of this company. They're keen that this be put in front of shareholders," he said of the offer.
Asked if the price might increase, Taylor said Fletcher hoped to continue to talk to Steel & Tube but "we "think it's a good offer and would like to see it put to shareholders. We'd like to continue discussions with Steel & Tube."