Daily ShareChat: Fletcher Building

Fletcher Building's A$740 million (NZ$992 million) bid for Crane Group is taking advantage of a cyclical downturn in Crane's earnings but the offer price is reasonable, says James Cooper, an analyst at Aegis Equities Research which is owned by Morningstar.

"Crane's business is struggling after the previously strongly growing pipelines division weakened sharply, largely as a result of a decline in government orders," Cooper says.

"This compounded weakness in plumbing supplies business Tradelink, which has suffered because of building construction weakness," he says.

The company has had to drastically cut employee numbers over the last two years to maintain profitability.

Fletcher is offering one of its shares plus A$3.43 in cash for each Crane share. Crane's board has rejected the offer, saying it is inadequate and undervalues the company.

Fletcher's average annual return since listing in March 2001 has been 21% while Crane's average annual return over the last 10 years was 7.4%.

Cooper says accepting Fletcher's bid will offer Crane shareholders the opportunity to benefit from Fletcher's enhanced size, equity market presence and potentially higher liquidity.

"The combined group will be the 58^th largest company by market capitalisation on the ASX compared with Crane's 217^th position and Fletcher at 64^th."

Fletcher's bid may flush out a higher offer but, "in the absence of such we will advise acceptance of the offer."

Recommendation: Hold in the meantime.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

Fletcher Building faces probe into plasterboard supply deals
Fletcher closes Christchurch plasterboard plant after finding asbestos
Fletcher Building names Charles Bolt as general counsel, replacing Farrell
Fletcher beats estimates with $326M FY profit as NZ revives, Australia stays flat
Fletcher executive Worley leaves as underperforming Crane unit brought in-house
Fletcher puts strategy under microscope seeking $70M annual gain, will shed jobs
Fletcher Building 1H profit edges up
Fletcher Building capital notes rollover at 5.4 percent from 8.9 percent
Fletcher Building offloads CSP Coating galvanised steel unit
Fletcher not abusing its role running Canterbury home repairs, EQC says