Daily ShareChat: Fletcher Building

Fletcher Building is now paying a full price for Australia's Crane Group after revising up its takeover offer, says Rob Mercer at Forsyth Barr.

Still, "we see merit in the upside potential of the merged businesses over the medium term," Mercer says.

Given the revised bid has gained the full support of Crane's board, Mercer expects the bid to be successful.

Fletcher's revised bid, a mix of cash, special dividend and shares, is equivalent to A$10.07 compared with its original A$9.35 offer.

"The revised higher bid will cost Fletcher Buidling an extra NZ$46 million (or 7.6 cents per share for Fletcher shareholders) which we believe will be recovered through achieving a quick and successful takeover and upside over the medium term from the merged companies," he says.

"Most importantly, we see the Crane businesses as being a good fit with Fletcher Building's existing operations."

Mercer has a positive outlook for building activity over the next three to five years. He values Fletcher shares at $10 each and is forecasting a $398.8 million reported net profit for the year ending June, up from $272 million the previous year, rising to $449.4 million in 2012 and $492.2 million in 2013.

"Fletcher Building offers good value in the $7.50 to $8.50 range."

Recommendation: Buy.

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