Fletcher buys Australia's Laminex for $353M


Fletcher Building hopes the Laminex deal will give it a "natural hedge" against the New Zealand business cycle

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- New Zealand's biggest building products group, Fletcher Building, will pay NZ$754 million ($353 million) for the Australian laminates maker, the Laminex Group.

Fletcher Building CEO Ralph Waters announced the deal Wednesday, saying it would give the company substantial exposure to the Australian residential and commercial building markets.

It will also boost Fletcher Building's annual sales by about 25 percent to NZ$3.6 billion ($1.68 billion) and give it access to Asian export markets.

Walters said geographical diversification was a key objective for Fletcher Building, with the Australian purchase serving as a "natural hedge" against the New Zealand business cycle.

New Zealand's economy is expected to grow about 2.8 percent this year, compared with growth of about 3.75 percent in Australia. (Full story)

Change in revenue mix

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Walters said the deal meant revenues would be sourced 72 percent from New Zealand, 24 percent from Australia and 4 percent from elsewhere in the region.

The Laminex Group, which had sales in the year to June 30 of Aust. $608 million ($332 million), is held by Amatek Holdings, whose principal shareholders are investors managed by CVC Capital Partners Europe and DLJMB Merchant Banking.

Laminex makes decorative laminates and woodpanels for residential and commercial users.

It has 80 percent of the Australian decorated fibreboard market and 45 percent of the decorated particleboard market.

Walters said the Laminex acquisition would be "immediately positive" for earnings per share.

Debt and share combination

Fletcher Building will pay for it through a combination of bank debt and equity, placing 43.7 million shares with institutional investors in Australia and New Zealand.

There is an additional performance payment of up to Aust. $20 million (about $11 million) if Laminex earnings before interest, tax, depreciation and amortization (EBITDA) for the year to June 2003 exceed Aust. $95 million (about $52 million). EBITDA in the 2002 financial year was A$88 million.

Shares in Fletcher Building were suspended in both markets ahead of the announcement and a book-building process for the placement.

The stock closed 1.4 percent lower in New Zealand at NZ$2.81 on Tuesday before the trading halt. Trading will resume Thursday.