Fletcher Building weighs options including raising capital, Jarden on deck

Under-pressure Fletcher Building is actively weighing options including tapping investors for capital and divesting its residential and development unit, sources say.

Fletcher Building sold its Tradelink business in an auction that culminated in a $170m deal last month.

Beleaguered materials group Fletcher Building is actively weighing up its strategic options, including tapping investors for capital and divesting its residential and development unit, sources say.

While a final decision was yet to be signed off on Friday evening, Fletcher has investment bank Jarden canvassing investors on potential options as it seeks to shore up its balance sheet.

Sources told The Weekend Australian that Jarden was this week contacting investors to gauge their appetite for a potential divestment or partnership for Fletcher’s residential and development division.

It’s understood Jarden is also working on a potential equity raising for Auckland-based Fletcher, in a deal that may kick off as early as Monday.

Investors and analysts estimate the company could raise $NZ500m to $NZ1bn, if it were to tap shareholders. It is listed in New Zealand and Australia.

A Fletcher spokesman declined to comment on Friday.

Talk of a potential raising came amid heavy volume in Fletcher’s stock on Friday, including a large parcel of more than 15 million shares crossing in one line. Fletcher’s stock closed 1.9 per cent lower at $2.60, bucking a 0.2 per cent gain in the S&P/ASX200.

The under-pressure company and its advisers would be seeking to capitalise on an equity raising this week by Auckland International Airport. It raised $NZ1.4bn in a transaction that was well-supported by investors and covered not long after the deal was announced to the market.

Macquarie Capital and Jarden worked on that transaction.

But some large investors have expressed a preference for Fletcher’s board to avoid raising ­capital.

“We don’t think an equity raising is necessary and would support management and board efforts to avoid a capital raising at nearly all costs,” said Simon Mawhinney, Allan Gray’s managing director, in May. Allan Gray is Fletcher’s largest shareholder, according to Bloomberg.

Fletcher has had a turbulent 2024, including among its executive ranks. The company appointed chief executive Andrew Reding last month, noting he would commence as a director on August 22 and take the reins as group CEO from September 30. Mr Reding is also a former Fletcher executive.

His appointment came just six days after Fletcher appointed a new chief financial officer and group general counsel.

The company has been seeking to stabilise its business and improve its balance sheet.

Earlier this year, Fletcher launched a sale process for its plumbing supplies business Tradelink in an auction that culminated in the $170m sale of the unit last month. The deal included $160m cash payable on settlement on September 30, with the remainder being a deferred payment linked to milestones around the separation of the division.

Fletcher’s debt pile is being closely monitored by investors and analysts, particularly following earnings downgrades.

Citigroup analysts last month said Fletcher’s net debt for last fiscal year had come in at $NZ1.8bn, better than guidance of $NZ1.9bn to $NZ2bn. But they noted that was offset by expectations the group’s net debt to earnings before interest, tax, depreciation and amortisation would rise again in the six months ended December 31.

Originally published as Fletcher Building weighs options including raising capital, Jarden on deck