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UPDATED THURSDAY 8.30am: Shareholders in Australia's Crane Group which has emerged as a hostile takeover target for New Zealand's Fletcher Building, have been urged to pause before taking any action.
Crane's board issued an announcement to the ASX today saying it would meet as soon as possible to discuss the takeover offer and telling shareholders to take no action in the interim.
Crane has appointed investment advisers UBS and Blake Dawson.
WEDNESDAY 2.37pm: Fletcher Building shares (NZX:FBU) have fallen 3.3% after it announced an offer to buy Australian industrial pipes and plumbing company Crane Group.
Shares in Fletcher Building have dropped by 26c to $7.59, with the fall accelerating after the Australian stock exchange opened.
WEDNESDAY 2.37pm: Fletcher Building is looking to buy out listed Australian building products company Crane Group, in which it has a 14.9% stake, for $A740 million.
The offer, which will be made by subsidiary Fletcher Building (Australia), trades one Fletcher Building share and $A3.43 for each Crane share.
Based on Fletcher Building’s share price at the close of trading yesterday the offer equates to $A9.35 for each Crane share.
Based on this offer price the acquisition will cost Fletcher Building $A740 million.
This will be funded by the issue of 67.3 million Fletcher Building shares totalling $A400 million, and bank debt of about $A340 million from an existing undrawn bank facility.
Fletcher Building’s pro forma gearing ratio is expected to increase to about 33.1% from 26.8% as at June 30 2010.
Fletcher Building chief executive Jonathan Ling said the proposed offer provided a substantial premium for the shares of Crane and represented an attractive valuation multiple for Crane.
He said the combined group “will have an enhanced presence and liquidity on both the Australian and New Zealand stock markets.”
Mr Ling said, “The Crane businesses are complementary to Fletcher Building’s operations in the building materials and trade distribution markets and will enable the company to diversify its presence in Australia to include the plastic pipe and plumbing trade distribution markets.
“Crane’s shareholders will continue to have exposure to the Crane businesses and become a shareholder in a larger company.
“The combined group will have a broader diversification of revenue and earnings by product and geography, while the increased scale and breadth of operations generated by the combination is anticipated to enhance the future competitive positions of both companies,” Mr Ling said.
Crane Group has businesses in three main areas: pipelines, trade distribution and industrial products.
Its brands include Tradelink, MasterTrade and Mico Metals. Crane said its board would meet as soon as possible to consider the offer. In the meantime, the board recommended that shareholders take no action. Crane shares last traded at $A9.34, up $A1.67 (21.8%) from Tuesday's closing level.