Fletcher Building’s Rocla concrete pipes sale rolling on

Fletcher Building appears to be moving ahead with the sale of its Rocla concrete pipes business.

Fletcher Building appears to be moving ahead with the sale of its Rocla concrete pipes business.

Prospective buyers were sent promotional material about the sale this week. PwC is working as an adviser.

Fletcher tried to sell the operation in 2016 and announced at its results briefing in February that it would be put on the market.

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

According to a flyer for the sale, which has been dubbed ‘‘Project Mohawk’’, Rocla has been owned by Fletcher since 2005, and supplies concrete and road safety barrier solutions to the building and infrastructure sectors and the roading market.

It also offers engineering and design services, and has four divisions.

 

These include pipeline products, which sells concrete pipes and precast materials; sleepers, which sells concrete railway sleepers; poles, which includes concrete telegraph and electricity poles; and Australian construction products, such as road safety equipment.

The operation is a manufacturing and distribution network of 20 sites located along the eastern seaboard of Australia, 11 of which are owned by the company.

Rocla’s revenue for the 2019 financial year was $233m and some suspect it could achieve a sale price up to $200m.

The majority of the revenue comes from its pipeline products business, where the products are mostly used for water quality solutions.

Fletcher, which is listed in Australia and New Zealand, secured the business in 2005 from Amatek as part of a wider $530m acquisition.

Adelaide Brighton looked at an acquisition of the business some time ago, but passed on the opportunity.

This time around it could appeal to private equity.

 

However, advisers from PwC will need to address questions about how new vertical pipe technology being sold in the market would impact market share.

Fletcher entered the Australian trade supplies market in a big way during 2010 with the $740m acquisition of the Crane Group under the leadership of Jonathan Ling.

Former chief executive Mark Adamson made some unofficial efforts to sell various parts of that business but they were retained due to a lack of buyer interest.

However, when former UGL and Tenix boss Ross Taylor was appointed as Fletcher Building chief executive in 2017, his plan was to retain most of the Australian operations and improve earnings, while staging an exit from geographies far away from its Auckland head office.

As a result, the US-based Formica business was sold in late 2018 to Broadview Holding for $US840m ($1.17bn).

The market value of Fletcher is currently $3bn. Its share price — currently at $3.61 — was more than $5 at the same time last year.

One of its substantial holders is deep value investor Allan Gray, which holds more than 5 per cent of the stock.

Last month, Mr Taylor said until the COVID-19 crisis, Fletcher’s performance was in line with expectations, but it booked a loss in April amid the coronavirus lockdown in New Zealand.

The builder, developer and building materials supplier slashed up to 1500 jobs after it earlier cancelled its interim dividend and share buyback and is revising its future spending.

It has $650m of debt.