Recent stock market bids and deals seem to have made it easier for troubled Kiwi building products giant, Fletcher Building (ASX:FBU), to convince big investors to contribute to the $NZ700 million capital raising, which had the feel of an emergency round to help the company survive.
The company aimed to raise $NZ282 million from investment funds and $NZ418 million from current shareholders. It went into a trading halt on Monday on both sides of the Tasman to allow the first part of the fundraising to take place.
The halt lasts until tomorrow, and some reports on Monday afternoon suggested that the issue managers have already secured coverage for the total amount.
Analysts mentioned that, aside from Kerry Stokes’ Seven Group Holdings, there is a scarcity of direct investment exposure to building and construction materials. There is, however, significant exposure to contractors like Downer EDI, Macmahon Holdings, and Monadelphous.
In the past year, CSR was taken over, Adbri was acquired, and so was Boral (by Seven Group Holdings), leaving investors with only indirect ways to gain exposure to key products ahead of an expected building revival next year.
While Brickworks remains listed, it is controlled by the Milner family’s Washington H. Soul Pattinson, and the Southern Queensland-based Wagner Corporation, along with its cement business, is considered too small and too regional for many investment funds.
Analysts stated that there is now a major shortage of material-related investment opportunities on the ASX (excluding the mining sector) with exposure to building and construction. Fletcher is the largest remaining, making it easier to sell the idea of the capital raising.
Fletcher also made it more challenging for big investors to say no by pricing it at $NZ2.40, which amounts to a 37.5% dilution of the existing issued capital base.