Steel & Tube: Fletcher offer 'unwelcome'

Wednesday, 10 October 2018

Steel & Tube said the offer undervalued the business.

Steel & Tube has described Fletcher Building's attempt to take it over as an 'unsolicited and unwelcome' approach.

Board chair Susan Paterson has written to shareholders explaining why it turned down a non-binding indicative offer from Fletcher, one of its largest competitors.

The embattled construction firm proposed to acquire all the construction supplies company's shares at a price of $1.70 each. It has held conversations with shareholders and the board.

It said earlier shareholders, who collectively own more than 20 per cent of all Steel & Tube shares on issue, confirmed their position that the board of Steel & Tube should, in good faith, progress the development of the proposal with Fletcher Building, with a view to it being put to Steel & Tube shareholders.

Fletcher Building said the acquisition was a good fit with its strategy.

But Paterson said the offer undervalued the board's view of the company's value and would give Fletcher too much dominance in the marketplace.

'The proposed acquisition would face challenging issues for clearance under the Commerce Act that would take some time to work through, due to Fletcher's vertical presence and significant size in several steel product markets.'

Paterson said the approach by Fletcher Building was unsolicited and unwelcome.

'The fact that Fletcher made this indicative offer speaks to our reputation and the strength of our business. Obviously Fletcher see a lot of value in our business and its future potential, as do we, with both board and management personally investing further in the company through the recent capital raising.

'This approach does not prevent higher-value approaches from other interested parties and your board will continue to evaluate strategies and actions that deliver the best value to shareholders. Our priority is the turnaround of the company and we continue to make positive progress under our 'Striving for Excellence' strategy.'

She said Steel & Tube had a well-balanced exposure across the manufacturing, construction and rural sectors.

'Our goal is to be the leader in buying, selling, processing and placing steel in New Zealand and we believe we have the right strategy and the right team in place to achieve this.

'Your board remains very confident in the company's improving performance as Steel & Tube continues to win new customers, sign large contracts, increase efficiencies and reduce costs.'

It recently confirmed earnings guidance of $25 million before interest and tax for the financial year ending June 30, 2019, and its intention is to resume payment of dividends in this financial year.