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Fletcher Building set to become bigger in Australia than NZ

Wednesday 15th December 2010

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Fletcher Building will have a bigger business in Australia than in New Zealand in terms of revenue, if a plan it revealed today to bid for Australian company Crane Group is successful.

It will also jump to be the 58th biggest company on the ASX, from 64th, if the bid succeeds.

New Zealand's largest building company gave notice of an intention to bid for all of the Australian plumbing supplies firm today without doing due diligence, saying Crane Group "chose not to engage" when it tried to talk to it.

Fletcher Building currently sources 34% of its revenue in Australia, 49% in New Zealand and 17% in other countries.

If it buys all of Crane Group 45% of its revenue will be sourced in Australia, 42% in New Zealand and 13% will come from the rest of the world.

The deal would make "Australia by far the biggest segment of our business", the historic New Zealand building firm said.

Fletcher Building will operate Crane Group as a new independent division.

"The Crane division would be just slightly the biggest division in our group," Fletcher Building said.

Crane Group itself expanded into New Zealand in 1994 with the purchase of Tradelink Plumbing Supplies from Burns Philp & Co. That acquisition doubled the size of Crane's plumbing supplies business.

Crane Group has become New Zealand's leading trade-related wholesale merchant for plumbing, pipeline, electrical and safety products.

Its New Zealand unit, Crane Distribution New Zealand, encompassed Mico Plumbing and Pipelines, MasterTrade and Corys, an electrical supply business.

Fletcher Building's business units include Humes Pipeline Systems in New Zealand and Rocla Pipeline products in Australia. Fletcher Building also owns the Placemakers building materials supplier.

Crane Group divides its business into three categories of pipelines, trade distribution and industrial products.

Fletcher Building said the acquisition would give it a plastic pipe manufacturing business, which would extend its existing concrete pipe business.

Crane Group's trade distribution business in plumbing and electrical supplies would complement Fletcher's existing trade distribution business.

In industrial products Crane Group had a specially metal manufacturing and distribution business that would complement Fletcher Building's significant steel distribution business in New Zealand.

New Zealand sales of its trade distribution business fell 13% in the year to June 30 and earnings before interest and tax were down 76% on the previous year, according to a presentation.

Crane Group has been reducing costs and consolidating branches and reducing staff in New Zealand.

The Fletcher Building bid values Crane Group at $A740 million ($NZ982 million). The conditional offer is $A3.43 cash and one Fletcher Building share for every Crane share.



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