Fletcher Building Ltd said yesterday it had entered into an agreement to sell the Formica Group to Broadview Holding BV for $US840 million ($NZ1.226 billion). Broadview said it was on a debt-free & cash-free basis.
Fletcher anticipates completing the sale by 30 June, the end of the 2019 financial year.
Net of costs, Fletcher expects the sale to return about $US70 million ($NZ102 million) less than the agreed price.
The company’s board also said yesterday it would reinstate dividends, starting with an interim payment in February. Dividends were canned this year when the company reported a $322 million half-year loss and a $190 million full-year loss.
Fletcher Building chief executive Ross Taylor said the sale was subject to conditions which are customary for a transaction of this nature, including regulatory approvals.
Mr Taylor said: “The divestment of Formica completes our strategy to exit non-core businesses, having already completed the sale of Roof Tile Group in November. Our 5-year strategy is to refocus Fletcher Building’s capital & capability behind our New Zealand & Australian businesses, with building products & distribution at our core.
“We are pleased to have signed the sale agreement in line with our target timing, and to have achieved a strong valuation for the business. We believe Broadview is a natural owner of Formica, being a leading player in the laminates industry. We are confident that the regulatory process required to complete the sale will go smoothly, and on that basis expect the sale to be completed by the end of the 2019 financial year (30 June 2019).”
Commenting on the intended use of the sale proceeds, Mr Taylor said it was important to first complete the sale, and that the company would continue to take a prudent approach to management of its balance sheet.
Meanwhile, Fletcher Building confirmed its intention to reinstate dividends, starting with an interim dividend to be declared when the company’s half-year results are finalised on 20 February.
The decision to reinstate the dividend was based on the Fletcher Building board’s confidence in the company’s trajectory & return to profitability in the 2019 financial year: “The board will size the dividend prudently, having regard to the ongoing capital requirements of the company. Given the expected settlement timing of the Formica sale, the 2019 dividend is likely to be weighted towards the final dividend.”
The sale proceeds from the Formica transaction will be subject to certain deductions, including pension liabilities & other debt-like items retained in the business, and transaction costs. These items are expected to total about $US70 million ($NZ102 million). Formica will be classified as “held for sale” and subject to an impairment test in the Fletcher Building half-year accounts.
The regulatory approvals required for the transaction relate to the competition regimes in a number of the countries where Formica operates.
About Formica & Broadview
Formica employs 3400 people in North America, Asia & Europe. It’s a leader in the design, manufacture & distribution of innovative surfacing products for commercial & residential applications.
Broadview is an industrial holding company with a focus on materials technology & energy. The group has 2900 employees worldwide and combined sales of €700 million. The company commented in its brief release: “The transaction is a good fit with Broadview’s strategy. Broadview pursues long-term growth & value creation through active support of its operating companies & efficient capital allocation. Broadview aims to support its companies in their development to become & stay the point of reference in their industry.”
The company is a member of Amsterdam stock exchange-listed HAL Holding group, which acquires & holds large stakes in companies with the objective of increasing long-term shareholder value. HAL has market capitalisation of about €11 billion.
HAL Holding NV is an international holding company based in Curaçao. All its shares are held by HAL Trust and form the trust’s entire assets. HAL Trust’s shares are quoted on the Amsterdam Stock Exchange.
Note: all financials have been converted at a $NZ/$US exchange rate of 0.685.
>21 November 2018:Guidance kicks Fletcher share price down as new chiefs present positive outlook at annual meeting
22 August 2018: Updated: A loss, but flow of red ink stops at Fletcher Building
21 February 2018: Fletcher half-year loss $322 million
14 February 2018: Another $486 million of losses for Fletcher Building, and Norris resigns
27 October 2017: Sheppard turns Fletcher meeting into “absolution or exorcism” exercise
21 September 2017: A year on, Fletcher board still has ‘construction nous vacancy’ pencilled in
20 March 2017: Fletcher Building cuts earnings guidance by $110 million
Attribution: Company release.