Is Wesfarmers eying a Fletcher Building takeover?

UPDATED: Fletcher Building shares rise in early morning trading on the speculation.

Australia-based conglomerate Wesfarmers has built a stake in Fletcher Building of about 3-4% and it could become a takeover target, according to the Sydney Morning Herald.

Wesfarmers, which also owns the Bunnings home improvement chain, is planning to spin off the Coles supermarkets chain into a separately listed top-30 company on the ASX.

Fletcher Building's share price rose 11% or 66c to $6.50 in just the first half hour of trading on the NZX following the speculation.

Coles is Wesfarmers' largest business, accounting for 60% of its capital.

The Herald says the potential attractions of Fletcher as a turnaround investment could fit well with Wesfarmers’ stated strategy.

Fletcher owns the Placemakers building products chain of stores.

Fletcher’s shares ended trading at $5.84 on Thursday, putting its market capitalisation at $4.07 billion, a long way down from well above $10 early in 2017.

The share price fall was caused by ever-mounting losses by Fletcher’s Building + Interiors unit which constructs high-rise buildings.

SMH says a Fletcher spokeswoman said the company isn’t aware of a shareholding in Wesfarmers’ name and that it is likely that Wesfarmers would have bought shares using a nominee entity so it could remain anonymous until it reaches the 5% threshold at which it would have to publicly declare the stake.

More to come

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