Naturally shares in Sydney-based building supplies company Crane Group jumped more than 20% yesterday after New Zealand-based Fletcher Building made a surprise $740 million takeover offer.
Crane shares climbed $1.73 to close at $9.40 after Fletcher popped a cash and share offer worth $9.35 a share into the market before trading opened yesterday.
The $9.35 a share offer was a 22% premium to Crane’s close of $7.67 on Tuesday.
By the close yesterday the bid’s value was down to $9.24 after the fall in the Fletcher share price.
As a starting point, Fletcher said it had snapped up a 14.9% stake in Crane, mostly from local institutions.
Crane was taken by surprise and urged shareholders to take no action over the hostile bid and said its board would meet to consider the bid, announced by Fletcher before market open.
Fletcher is offering one Fletcher Building share and $A3.43 in cash for each Crane share, with the bid conditional upon, among other things, the acquisition of 90% of Crane shares.
In the statement to the ASX, Fletcher 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.
"The Offer is an attractive opportunity for Crane shareholders to both receive cash and become a shareholder in a larger and more diversified Australasian building materials manufacturing and distribution company, with pro forma combined FY10 revenues of over A$7.2 billion.
"Fletcher Building has delivered shareholders a total aggregate return of 435 percent since it listed as a separate company in 2001 compared to Crane’s 93 percent over the same period.
"Fletcher Building intends to apply the same business model to Crane that has proved to be very successful for its other businesses.
"The Combined Group will have an enhanced presence and liquidity on both the Australian and New Zealand stock markets," Mr Ling said.
Fletcher said it believes that combining the Crane and Fletcher Building businesses represents an attractive opportunity for the shareholders of both companies.
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. On the basis of pro forma accounts for FY10 the transaction is accretive to Fletcher Building’s earnings per share.
