Fletcher Building to buy Australia's Laminex for $A645 mln

By NZPA

Wednesday 18th September 2002

Building products firm Fletcher Building Ltd said today it will buy Australian laminated product manufacturer The Laminex Group for $A645 million ($NZ760.79 million).

The purchase, from privately owned Amatek Holdings Group, will be funded through a mixture of bank debt and an equity placement of 43.7 million shares to institutional investors in New Zealand and Australia.

Shares in Fletcher Building, which closed yesterday at $NZ2.81, were placed on a trading halt pending the announcement, and will remain suspended until the close of trading today to allow the book-building process for the share placement to take place.

Market analysts were still dissecting the figures this morning, but Forsyth Barr Frater Williams research manager Rob Mercer described the purchase price as "fair", while ABN Amro broker Cameron Stewart told Reuters it seemed on the high side.

"It'll probably create weakness across the whole board as funds are raised to pay for it," he said, adding that he expected the share placement to be at a sizable discount to the market.

Chief executive officer Ralph Waters said the purchase of Laminex, which sells laminated products under the Laminex, Formica and Formex brands in Australia and New Zealand, will be immediately positive to earnings per share -- both before and after goodwill.

"The Laminex Group is a highly successful operation with strong market positions across its product range and throughout Australia," Mr Waters said.

"It also has export markets in Asia and a manufacturing and marketing position in the New Zealand market.

"The business has performed very strongly in recent years through internal growth and acquisition, and by taking the lead in a substantial rationalisation of the industry. We believe it has excellent prospects for continued strong performance."

The group has about 80 percent of the decorate medium density fibreboard market in Australia and recorded revenues of $A608 million and ebitda before unusual items of $A88 million in the year to June.

The purchase will give the Fletcher Building group a greater geographical spread across Australasia, providing a natural hedge against downturns in the New Zealand business cycle, Mr Waters said.

With this acquisition, about 72 percent of Fletcher Building's full year revenues will come from New Zealand, 24 percent from Australia and the balance from elsewhere in the region.

Under the terms of the deal, Fletcher Building will make an additional payment of up to $A20 million contingent on Laminex's performance, the company said.

The purchase is subject to shareholder and Australian Foreign Investment Review Board approval. Shareholders will vote on the purchase, as well as a further issue of capital notes, at the company's annual meeting on November 12.

If approved, it will be settled in mid-November.

Organising brokers for the share placement are JB Were and Co and UBS Warburg. Details of the issue, which will be undertaken on the basis of a preferential subscription right for existing shareholders and capital note holders, are still to be decided.

Fletcher Building said the purchase did not require a further equity raising through the issue of ordinary shares.

Meanwhile, Fletcher Building said today earnings since the June 2002 balance date were substantially ahead of those for the same period last year.

Based on unaudited management accounts, earnings before interest and tax for the two months to August 2002 were $NZ48 million compared with $NZ22 million in the same period last year.

The company expects strong demand to continue through the first half of this year, before easing in the second half.

Fletcher Building posted a net profit of $NZ93 million in the year to June, in line with market expectations.

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