1 Feb 2011

Fletcher shares fall on acquisition fears

7:25 am on 1 February 2011

Shares in Fletcher Building fell more than 2% on Monday as investors feared the company may be spending millions of dollars on another troubled investment.

Australian plumbing and building supplies company Crane Group has accepted an increased offer from Fletcher Building.

The cash and stock deal is worth $A10.07 a share, and involves Fletcher paying an extra three cents a share, and Crane paying shareholders 50 cents.

Fletcher Building chief executive Jonathan Ling says it's still an attractive purchase, even if it means Crane has $40 million less in the bank, as the firm's half year result showed the cash position was higher than expected.

Mr Ling says he's confident Fletcher Building will get the 90% support it needs for the deal to go ahead.

A senior equities analyst at Morningstar, Nachie Moghe, says increasing the deal was the quickest and easiest way for Fletcher to get control of the company, and effectively stops other firms launching their own takeover bids.

Even at $A10.07 Mr Moghe thinks it's a fair price, but says the company's disastrous Formica investment is playing on shareholders' minds, and that they're worried about whether Fletcher can make the latest purchase work.

Mr Moghe says it's too early to say whether the acquisition will work.

Fletcher Building's shares fell 16 cents on Monday to $7.73.