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Fletcher agrees to buy Australia’s Crane Group for A$740M

Fletcher agrees to buy Australia’s Crane Group for A$740 million

Dec. 15 (BusinessDesk) – Fletcher Building Ltd. agreed to acquire Australia’s Crane Group Ltd. for A$870 million in stock and cash, gaining a network of plumbing supply outlets and the Iplex plastic pipeline systems business.

The offer values each Crane share at A$9.35, a 22% premium to its last trading price. Based on broker estimates for Crane’s 2011 earnings, the proposal amounts to a price-earnings multiple of 19 times and an enterprise value-EBIT multiple of 11.8 times, Fletcher said in a statement.

Crane last traded at A$7.67 on the ASX and has declined about 19% this year. Profit before one-time items fell 35% to A$36.8 million in 2010, as sales dropped 12%.

“The Crane businesses are complementary to Fletcher Building’s operations in the building materials and trade distribution markets,” said chief executive Jonathan Ling. The deal “will enable the company to diversify its presence in Australia to include the plastic pipe and plumbing trade distribution markets.”

Shares of Fletcher fell 1.6% to $7.73 when they resumed trading after being halted for the announcement. The transaction would be funded by the issue of 67.3 million new shares and bank debt of A$340 million from an existing facility.

The pro forma gearing ratio of the enlarged group would climb to 33% from 26.8%, Fletcher said. Pro forma 2010 revenue amounted to A$7.2 billion.

To kick off the deal, Fletcher has already acquired 13% of Crane from institutional investors at the offer price, lifting its existing holding to 14.9%.

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Fletcher plans to operate Crane as a separate division with minimal job cuts. The company will reap savings from a reduction in head office and administrative functions, it said.

The deal is subject to regulatory approvals and on reaching 90% of the target.
No break fees are payable in the event the deal doesn’t proceed.

Australia currently accounts for 31% of Fletcher’s revenue compared to 50% from New Zealand. The acquisition will lift the company’s per-share earnings, based on pro forma 2010 figures, it said.

(BusinessDesk)

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