Forum Archive Index - August 2000

[Mike Hudson <MHudson@placemakers.co.nz>]

Peter wrote
"Wesfarmers building division (Bunnings) must be interested in picking up
the distribution side of FLB - PlaceMakers etc. Bunnings have had a large
expansion program (especially the big 'sheds' they have created) over the
last few years and have shown an interest in NZ previously (in annual
reports). Their biggest competitor is Hardwarehouse (part of Howard Smith)
who already have a few 'sheds' in Auckland. Seems a logical way to get into
NZ and this could be part of GPGs plans (rumour again) to break up the FLB
group."

Wesfarmers building division (Bunnings) must be interested in picking up the
distribution side of FLB - PlaceMakers etc. Bunnings have had a large
expansion program (especially the big 'sheds' they have created) over the
last few years and have shown an interest in NZ previously (in annual
reports). Their biggest competitor is Hardwarehouse (part of Howard Smith)
who already have a few 'sheds' in Auckland. Seems a logical way to get into
NZ and this could be part of GPGs plans (rumour again) to break up the FLB
group.

Interesting scenario. Of course the objective of the senior management of
Fletcher Building is to retain the group as a separately listed entity. It's
the only way to save their jobs. What is thwarting this strategy is the low
FLB share price. I am not sure when the year end results are due to be
announced but it must be in next couple of weeks. The results will be very
good and the folks in the corporate office will be hoping that they will be
sufficiently spectacular to bring about a market re rating. I am not
suggesting that the results will be "massaged" in any way but I am sure that
everything will be done to accentuate the positive.  

The Board of FCL is committed to obtaining the best value for the
shareholders but it will not sell FLB in pieces, however there is nothing to
stop it selling to someone like GPG  who would break it up. A break up would
make sense as although all the companies within the Group are involved in
building in one way or another there is little synergy between except
perhaps in the case of PlaceMakers which is the biggest customer of Winstone
Wallboards, Fletcher Woodpanels,  Plyco Doors, Firths and some of the
companies in the Steel division.

James Hardie would love to get their hands on Winstone Wallboards which is
the jewel in the FLB crown.

Carters are a possible buyer of Woodpanels although the Commerce Commission
may have other ideas. 

There should be no problem in selling Fletcher Challenge Properties to one
of the local property companies.

The quarrying and aggregates business could be picked up by Pioneer or one
of the  other Aussie players as could Golden Bay Cement.

Fletcher Construction, Fletcher Residential and Plyco Doors would be good
candidates for a MBO. 

The Steel Group will be  a problem, it has been a bit of a dog.

That leaves the distribution companies, PlaceMakers, Scott Panel and
Hardware and the Building Depot. Bunnings are very keen to come to NZ. They
tried to buy the building Depot but were beaten to it by PlaceMakers.
However whether PlaceMakers itself would be of interest to them is a moot
point. As Peter said they are into big "sheds" or "big boxes" as they are
known in the industry. Typically a big box is between 7,500 sq. m and 10,000
sq. m  with an attached garden centre. All the stores are the same which
means they can use a standard format and drive efficiencies that way. Only
four or five of PlaceMakers operations are anywhere close to what they would
want. Another problem is the PlaceMakers Joint Venture structure whereby
most of their stores are 50% owned by their operators. This structure could
be unwound but it would mean the loss of most of the senior branch managers.
Howard Smith are another possible purchaser but their ownership of the
Hardwarehouse and Benchmark chains would give them a problem with the
Commerce Commission.

However all should be revealed by the end of the month. My pick is that
there will be no acceptable bid for FLB and it will lurch on for a while as
the only listed remnant of the Fletcher empire. 

Fasten your seatbelts for a bumpy ride!

Disclosure: Own, to my deep regret, too many shares in FLB. Although
associated with FLB have no more inside info than the rest of you great
unwashed out there.  

Cheers
Mike H

Mike  



----------------------------------------------------------------------------
http://www.sharechat.co.nz/          New Zealand's home for market investors
http://www.netbroker.co.nz/        Trade on Credit, Low Brokerage. Join now.
----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/forum.shtml.