Malaysian giant Gamuda emerges as Fletcher Building construction bidder

Australia and New Zealand-listed Fletcher Building has told the market it received offers for parts of its business.

Another party has surfaced as a suitor of Fletcher Building’s construction unit, according to sources, with suggestions that a group out of Malaysia has made an ­approach.

DataRoom understands that Malaysia’s Gamuda has expressed an interest in buying the Fletcher Building construction arm.

Gamuda is an engineering, property and infrastructure group and is one of the largest in Malaysia operating in the infrastructure sector.

It has worked on major and highly complex projects and operates in Australia, Singapore, Vietnam, Taiwan, India, Bahrain and Qatar, as well as its home country.

The business is listed in Malaysia with a market value of about $10.5bn.

Fletcher Building, which is listed in Australia and New Zealand, last month told the market it had received offers for parts of its business – including its construction division – but said it had not made a decision on whether to sell.

Market sources say the New Zealand construction industry had been left wide open for new international players to enter, with Fletcher retreating from some work. The New Zealand government was also urging international industry participants into the market to provide additional competition and their expertise ahead of a planned multibillion-dollar infrastructure spending pipeline.

Fletcher Building held its investor day on June 24 but offered limited insight on any potential asset sales, as it works to cut costs and streamlines divisions.

Some came away with the impression that the group may exit real estate development and divest its $NZ1bn ($928m) land bank after emphasising that its focus in the future would be on building products and building materials, where it dominates in the New Zealand market.

Fletcher Building announced a strategic review last year after its former chairman and CEO departed following a worse-than-expected loss, and larger-than-expected project writedowns and asset impairments.

Some believe that one part of the business that could be of particular interest to suitors in its construction unit is parts of its civil engineering business, including road construction and maintenance unit Higgins that it purchased in 2016 for $NZ315m.

Since then, it has sold the Higgins Fiji operations, reaping about $NZ40m in proceeds.

France’s Vinci, which already operates in New Zealand, was also said to be hovering.

For the six months to December 31, the construction unit generated $NZ20m of earnings before interest and tax after a loss in the previous corresponding period. When Fletcher Building purchased Higgins, it was generating about $35m of earnings before interest and tax, and some market participants estimate that may have now halved.

The company has offered indications that it would not part for the construction unit for less than $NZ300m.