Here’s news that will worry some investors.
Fairfax Media reports that Wesfarmers has bought a stake of about 3% to 4% in the loss-making trans-Tasman construction and industrial materials company Fletcher Building.
Citing “sources close to Wesfarmers” Fairfax Media’s reports will worry investors in Wesfarmers who are still smarting from losses of at least $1 billion from the ill-advised foray into UK hardware retailing, with more to come as Wesfarmers looks to exit the disaster.
The move helped the new management team at Wesfarmers agree to the spin off of Coles to take some of the volatility associated with the weak retailing environment out of the Wesfarmers’ accounts and share price.
Fletcher is dual-listed on the Australian and New Zealand stock exchanges and is one of the largest listed companies in New Zealand. It has assets on both sides of the Tasman, about 21,000 employees and a market value of $4.1 billion.
It’s share is down 27% in the past year because of huge losses on more than a dozen building and fit out contracts in NZ and off 45% since the start of 2017 when losses and problems in some of the contracts first emerged.
The Financial Review said there is growing speculation the Perth-headquartered giant has already identified Fletcher Building as one potential acquisition target. Investors in Australia will be wanting to know ‘why’?
Wesfarmers declined to comment on the stake while a spokeswoman for Fletcher said: “We are not aware of a shareholding in the name of Wesfarmers in Fletcher Building.”
Fairfax Media said it is likely that Wesfarmers would buy stock on an anonymous basis through a nominee entity and would only have to declare its holding once its stake reached 5%.
