Fletcher Building may sell CSP Coating galvanised steel unit

Fletcher Building (NZX: FBU) may sell its CSP Coating galvanised steel unit to Hamilton-based Perry Group as it looks to replace some of its treated metal products with imports.

Perry Metal Protection, a subsidiary of the family-owned group, has lodged an application with the Commerce Commission to buy the Fletcher unit for an undisclosed sum, and will sell an unnamed unit to stop it from gaining a monopoly in galvanised steel in the South Island.

Galvanising is the process of immersing steel in molten zinc to create a protective layer.

The proposed acquisition comes after Fletcher put the unit on the block in July last year, and will give Perry new plants in Auckland and Christchurch.

Fletcher's under-performing steel business has indicated it "will import certain pre-galvanised products that are currently galvanised at CSP", the application says. Local galvanisers compete indirectly with those imported products, according to the application.

The construction company carved up its steel business last year, adding its long steel and distribution units, which include CSP, with its concrete unit to create a new infrastructure segment, and shifting its coated steel business under the building products division.

Fletcher's steel unit posted a 42% decline in annual earnings to $48 million on a 5.3% fall in sales to $1.15 billion. That was about 13% of Fletcher's total revenue.

If Perry isn't cleared by the anti-trust regulator to buy the Fletcher business, the construction company will sell the unit to another party, the application says.

Perry's main interest is in CSP's Auckland operation, which it plans to use to create efficiencies with its recently built plant in Te Rapa, Hamilton.

The Hamilton-based group's galvanised steel business operates plants in Auckland, Hamilton, Tauranga, Wellington and Christchurch.

Perry Group holds interests in property projects in the central North Island, dairy farms, quarries and plumbing supplies.

A decision on the clearance application is expected on January 29.

(BusinessDesk)