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12/10/2018 — Other Minerals and Metals
Steel & Tube resists Fletcher bid
By Simon Hartley

Steel & Tube Ltd (NZX: STU) has told shareholders it is rejecting Fletcher Building Ltd's (NZX & ASX: FBU) hostile $282 million takeover offer, saying the $1.70 per share is too low and Commerce Commission clearance would take too long.

The initial offer early last week buoyed Steel & Tube shares more than 20% to touch $1.59 at the time, but they had steadily eased back since then to $1.48 on Wednesday.

Since confirming the offer a week ago, Fletcher has been silent, but analysts have chimed in that the offer may have to increased.

Steel & Tube booked $53.8 M of impairments and asset write-downs, for its year to June, followed by an $81 M capital raising, as it continues a drawn-out restructuring process.

Steel & Tube chairwoman Susan Paterson said Fletcher's approach was unsolicited and unwelcome.

“The fact that Fletcher made this indicative offer speaks to our reputation and the strength of our business,” Mrs Paterson said.

In a letter to shareholders released through the NZX this week, Mrs Paterson said the company's board decided Fletcher's $1.70 offer “significantly undervalues” Steel & Tube.

She iterated earning guidance of expectations of $25 M in earnings before interest and tax for its current financial year, plus resumption of dividend payments.

Mrs Paterson said the proposed acquisition would face “challenging issues” for clearance under the Commerce Act.

Separately, analysts last week speculated a merged Steel & Tube and Fletcher entity would amount to more than 50% market share in the steel sector, while the Commerce Commission “brightline test” for overall market share was a holding of less than 40%.

Mrs Paterson did not venture any comment on combined market share, but said that a Commerce Commission application would take some time to work through, due to Fletcher's vertical presence and significant size in several steel product markets.

“Our priority is the turn-around of the company and we continue to make positive progress under our Striving for Excellence strategy,” Mrs Paterson said.

*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.

PDF File Letter to shareholders. (137.3 kilobytes)
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