Fletcher shares gain after shortfall bookbuild cleared at premium to offer price

Friday 20th April 2018

Fletcher Building shares rose 3.3 percent when they resumed trading as investors were buoyed by the premium paid in the bookbuild to clear leftover entitlements in the institutional component of a $750 million capital raise.

The shares gained to $6.20 from a theoretical ex-rights price of $6 having been halted for three days during the Auckland-based company's capital raise. Investors took up the remaining 2.2 million entitlements in the bookbuild at a clearing price of $6.15 apiece, more than the $4.80 entitlement offer. The institutional component of the capital raise has generated gross proceeds of $515 million, with a 98 percent take-up meaning there was a limited number in the shortfall bookbuild.

"The questions investors will have is whether all the problems have been sorted," said Grant Williamson, a director at Hamilton Hindin Greene. "What will retail investors do? I'd expect the majority to take up their entitlements so they don't get diluted."

Fletcher's shares were halted at $6.27 ahead of the capital raise, having dropped 18 percent this year. The funds raised from the pro-rata one-for-4.46 accelerated entitlement offer at $4.80 a share will go towards repaying debt as the construction and building products company seeks to strengthen its balance sheet.

The company came under pressure after cost blow-outs from its Buildings + Interiors division breached its banking covenants, and the firm is still in talks with its US Private Placement noteholders.

Williamson said the price set in the shortfall bookbuild showed institutional investors were "relatively encouraged" by Fletcher's efforts to shore up its books.

Fletcher also plans to sell its Formica and Roof Tile Group international businesses which Morningstar Research analysts estimate are worth about $700 million.

The retail component of Fletcher's capital raise opens on April 23 and closes on May 11, and will be followed by a bookbuild for any entitlements not taken up.

(BusinessDesk)

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