CPE Capital eyes more buys as Rocla deal is finalised with Fletcher Building

Building materials assets remain in demand in a busy period for mergers and acquisitions across the board.

Private equity firm CPE Capital appears to be turning its attention to acquisitions in the building materials sector after recently walking away from a $2.3 billion deal to buy Bingo Industries with Macquarie Infrastructure and Real Assets, as talk in the market surfaces that it is finalising a deal to buy Fletcher Building’s Rocla pipes operation.

At its investor day on Wednesday, Fletcher Building told the market that the sale price of its Rocla business, if completed as expected in the first quarter of the 2022 financial year, would be about $NZ60 million ($56.5 million).

The company has declined to comment on the identity of the buyer, with an announcement to provide further details in the coming weeks, but sources around the market have been pointing to CPE Capital.

Building materials assets remain in demand in a busy period for mergers and acquisitions across the board.

Sources say that a major building materials operator is among the groups looking at Boral’s multibillion-dollar division in the US.

Bank of America has been hired to sell the US assets, with the exception of its fly ash operations in the US that are up for strategic review through Royal Bank of Canada.

Sources say Boral’s adviser has fielded strong interest for the US arm from trade groups and private equity firms.

 

Logical suitors include CRH or Cornerstone, a business created through the merger of PlyGem and NCI and backed by private equity firm Clayton, Dubilier & Rice.

Cornerstone is believed to be selling its metal panels business in a deal that could see the proceeds redeployed into exterior building products.

In the US, Boral operates in fly ash, stone and roofing, light building products, windows and concrete blocks.

Fly ash is estimated to account for a third of its US-based operations.

It increased its exposure there after it purchased US-based Headwaters for $3.5bn in 2016, a great disappointment for investors.

Boral is handling US approaches while dealing with a $6.50 per share takeover bid from the Kerry and Ryan Stokes-led Seven Group Holdings, which is looking to increase its stake from 23 to 30 per cent.

Boral’s shares were trading at $6.82 in Thursday afternoon trade. The $7.9bn offer has been rejected by the company.

With respect to Fletcher Building, the Rocla concrete pipes business has been up for sale for about a year through PwC as part of what was called ‘‘Project Mohawk’’ after earlier sales attempts in 2016.

Fletcher earlier sold its Rocla Quarries business to Hanson, reaping $203m.

It also offers engineering and design services. Divisions include pipeline products, which are mainly used for water quality solutions, sleepers, poles and Australian construction products, such as road safety equipment.

Rocla’s revenue for the 2019 financial year was $233m. Earlier some thought Fletcher could get price of up to $200m.

However, some buyers have shied away from the opportunity due to concerns about how new vertical pipe technology being sold in the market would affect market share. Fletcher, which is listed in Australia and New Zealand, secured the business in 2005 from Amatek as part of a wider $530 million acquisition.

On Wednesday, the company offered guidance about its Rocla sale as it announced an on-market share buyback worth up to $NZ300 million next month.

It also told the market it now expects its earnings before interest and tax to be between $NZ650 million and $NZ665 million after earlier suggesting it would fall between $NZ610 million and $NZ660 million.

The company tipped robust sales volumes in Australia and New Zealand for the building products provider, builder and property developer.

CPE recently made a $2.3 billion bid for Bingo Industries with Macquarie Infrastructure and Real Assets but walked away, leaving MIRA to pursue the company alone.