Fletcher drops Horokiwi Quarries from Higgins purchase as application delayed again

Thursday 30th June 2016

Fletcher Building has dropped the Horokiwi Quarries from its application to buy rival construction company Higgins Group Holdings, a step that may help win approval from the Commerce Commission which today delayed its ruling for the second time.

The regulator identified the manufacture and supply of aggregates from quarries as its key competition concern in a statement of preliminary issues released in February. Horokiwi Quarries, a 50-50 joint venture between Higgins and Fulton Hogan, operates three quarries in the Wellington region.

The change in the application, excluding Horokiwi, is in a letter to the commission from Fletcher's legal adviser, Bell Gully. Fletcher announced on Feb. 2 that it would pay $315 million for Higgins, New Zealand's third-largest road construction and maintenance company, subject to regulatory approval. It didn't immediately say whether that price would be amended.

The commission said in its Feb. 29 statement that the only area of potentially anti-competitive overlap between the two companies as being the market for crushed rock aggregates used in road-building and associated infrastructure projects. As a result, it announced an investigation into the existence of regionalised markets for aggregates and Fletcher's claim that competitors could easily enter the market in regions where there are ample deposits of alluvial gravels for quarrying.

It would also scrutinise Fletcher's claim that its concentration on vertical infrastructure such as bridges and tunnels meant there is little overlap with Higgins's focus on horizontal infrastructure, meaning road building and maintenance.

The decision, which had been due today, is now scheduled for July 22.

Fletcher shares rose 2.2 percent to $8.47 and have gained 3.5 percent in the past 12 months, lagging behind a 20 percent gain in the S&P/NZX 50 Index. The stock is rated a 'buy' based on the consensus of 11 analysts polled by Reuters.

BusinessDesk.co.nz

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