Fletcher Building will not buy all the Carter Holt Harvey assets put on the block by billionaire Graeme Hart, but might acquire small parts of the businesses. Speaking after yesterday's annual meeting in Auckland, Fletcher chief executive Jonathan Ling said the building materials manufacturer and distributor would not make any big acquisitions within the next three months.
Mr Hart is selling building product makers and marketers Wood Products New Zealand and Wood Products Australia, the Carters building materials chain, and furniture and joinery business Interion. Fletcher Building. advised by investment bank Goldman Sachs JBWere, is understood to have looked at these businesses. However, Carter Holt owner Rank wants to complete any sale, which analysts expect to be about $2 billion, by the end of the year.
Asked about the potential for big acquisitions, Mr Ling said: "There's nothing of any size in the pipeline at the moment." Asked specifically about the Carter Holt asset sale, he declined to comment, citing confidentiality obligations. It is understood Fletcher could buy small parts of the businesses, possibly as part of a consortium. However, international private equity group CVC Capital Partners is believed to be the frontrunner to acquire the Carter Holt assets.
Mr Ling said Fletcher's current focus was integrating July's US$700 million (NZ$929 million) acquisition of benchtop group Formica from private equity groups Cerberus Capital Management and Oaktree Capital Management. Mr Ling said the planned closure of a Formica factory in California and the doubling of production at an Ohio factory were running behind schedule.
Fletcher will pay Cerberus and Oaktree a further US$50 million if this restructuring is finished by June 30. Mr Ling said delays would affect this payment but, citing confidentiality agreements, he declined to say how.
Formica's Asian and European operations, which comprise about two-thirds of its business, were performing better than expected, helping to offset the slowing United States economy, he said. Predicted savings from combining Formica with Fletcher's Laminex business, about $13 million in 2007-08, were on track.
Chairman Roderick Deane said Fletcher's net earnings for the first four months of 2007-08 were ahead of the same stage last year both with and without the inclusion of Formica.
Fletcher was "comfortable" with analysts' forecasts for annual earnings after tax and before unusual items of between $450 million and $460 million. After removing one-off tax and insurance benefits, last year's profit rose 5 per cent to $399 million. At more than $1 billion, Fletcher's construction backlog was at record levels, Mr Ling said.
Fletcher shares rose 12 cents to $11.30 yesterday.
