Mystery surrounds potential Fletcher buyers

Wednesday, 11 June 2025

Fletcher Building is fielding interest in parts of its business from potential buyers, but industry observers do not know who those buyers might be.

In a statement to the NZX on Wednesday, the company said it had received “ongoing inbound inquiries from parties interested in its businesses”.

The interest was directed at a number of divisions, including the construction division, and came in the midst of a strategic review, which has already seen the company announce it would disestablish its australian division.

Fletcher said no decisions had been made to sell any of its businesses, and that it would provide more details of the outcomes of the strategic review at its investor day in June.

Forsyth Barr senior analyst Rohan Koreman-Smit said he was in the dark as to who the interested parties might be, but he assumed they would be from offshore, and felt the highlighting of the construction division was telling.

It had been the cause of significant pain for a number of years and was a bit of asymmetrical risk given the current environment, he said.

“They have actually done quite a bit of work on the division, including its forward order book, so there is less risk on what they have in place now.

“But it trades at lower multiples than the building materials division because the risk involved is different, as we have seen in recent years.”

The company’s previous management had signalled it had largely worked its way through its legacy problem projects, although that was before a recent development on one of them, he said.

Last week SkyCity announced it would sue Fletcher for $330 million in damages for losses sustained after lengthy delays to the opening of the New Zealand International Convention Centre in Auckland.

Koreman-Smit said the previous management had indicated construction would probably not be its core business going forward, and he suspected the new management, headed by new chief executive Andrew Reding, would not think differently.

He could see why Fletcher might want to divest the division, and he could also see why offshore investors would be interested in buying a New Zealand company of scale in the current environment, he said.

“The new Government has identified 17 roads of national significance, and there is a real push for infrastructure development more broadly. The economy is subdued, but there is a firming pipeline of work to come through, and scope to build.”

Sam Stubbs is managing director of KiwiSaver fund Simplicity, which has a 1.5% shareholding in Fletcher with $40 million worth of shares.

He said Fletcher had a strong position in its markets, but was valued less than a few years ago due to the mismanagement of the previous board.

Given New Zealand’s rising population and the fact Fletcher faced little competition, there were many private equity players who would look at the company with a long-term, contrarian view, he said.

“I’ve got no idea exactly who is interested, but there’s more private equity around now, and there’s always vultures out there too.”

What division might be sold would depend on the price, but companies that were in distress tended to sell their crown jewels off at a lower price to create cashflow and good news, Stubbs said.

“I don’t know what Fletcher management would consider its crown jewels, but if the company gets split up it could be a short-term fix for a long-term problem.

“It might be good news for KiwiSavers as share prices could go up, but if a key division ends up in offshore, private ownership it could be quite bad for New Zealanders,” he said.

“That is because an offshore owner will always want to do just one thing and that is maximise the profit of the business. And that means it will cost more to build houses in New Zealand.”

When Fletcher announced its half year results in February, and at its last annual meeting in October the company faced questions around whether parts of the business might be sold.

But on those occasions management representatives indicated the outcome of the strategic review would guide any decisions in that space.