Schroders takes aim at Fletcher Building

Fletcher Building has been under fire from investors. Picture: iStock

One of Fletcher Building’s largest shareholders has failed in its bid to unseat a director at its annual shareholder meeting Wednesday, with Cathy Quinn re-elected to the board amid a year of turmoil at the Australian and New Zealand building materials provider.

DataRoom understands Schroders Investment Management, which holds about 7.8 per cent of Fletcher Building, had been applying pressure on proxy advisers to recommend a vote against Cathy Quinn as a director to the board, but she was re-elected despite 22.7 per cent opposition.

Fletcher Building received an 11 per cent vote against its remuneration report in a year the company’s performance has been heavily criticised.

Schroders’ opposition follows a discounted equity raising to secure $700m, which the institutional investor opposed.

The investment management firm launched its attack after the Fletcher share price almost halved in the past year as tough economic conditions weighed on its performance, which has been 2 per cent below the benchmark used by investors for the year to date, while commanding 70 basis points for fees.

Schroders criticised the Fletcher equity raising’s structure as a non-renounceable deal. Non-renounceable rights offers do not allow shareholders to sell the rights on the market to earn returns, but the share price is now well above the raising price.

The Jarden-advised placement was a 1 for 4.49 pro rata accelerated non-renounceable entitlement offer at $NZ2.40 per share.

The price was 17 per cent lower than the closing price on the NZX at $NZ2.89 on the previous trading day (it closed at $2.60 on the ASX).

Shares in Fletcher, however, closed across the Tasman at $NZ3.18 on Wednesday.

Fletcher Building paid out $NZ22m of fees for the raising, which included a 0.6 per cent lead management fee of the proceeds and a 1.9 per cent underwriting fee. This saw Jarden receive between $13m and $18m of the fees all up.

The fees handed to Jarden, which handled a recent $NZ1.4bn equity raising for Auckland Airport, have been a point of contention, but market sources say they were in line with other raisings at a similar discount and size.

Fletcher raised $NZ750m of funds in 2018 at the start of Ross Taylor’s leadership, following construction project cost blowouts and high debt, at a 23.4 per cent discount through Macquarie Capital at $NZ4.80 a share, a 23.4 per cent discount to the last closing price. Underwriting fees were 2 per cent with a 0.6 per cent management fee at the time.

Fletcher Building’s acting chairman Barbara Chapman announced she would depart once a new chair was appointed and said it had been a “frustrating and challenging period for our shareholders”.

Ex-Spark boss Simon Moutter was approached for the role but declined.

Chief executive Andrew Reding reconfirmed guidance for 2025 financial year earnings before interest and tax to be 10-15 per cent lower than the previous year.