Takeover Offer from Fletcher Building to Crane Group Unfair to Non-associated Shareholders – Ernst & Young

Lucas Gilmore, “Big 4″ observer
January 25, 2011 /

AUSTRALIA – Ernst & Young’s report released by Crane Group scrutinizing the offer of Fletcher Building to acquire the Iplex plastic pipes business and Tradelink owner has concluded undervaluation of the shares of its client, rejecting the cash one month after Fletcher made it known in December 2010.

An excerpt of the valuation report released yesterday disclosed Ernst & Young’s opinion that the offer made by Fletcher Building to acquire Crane Group is unfair and unreasonable to the non-associated shareholders of the target firm, suggesting an additional $45 million to $175 million to its $740 million takeover offer, or $9.35 per share which is 22c a share less than its $3.47 cash offer at the January 21 announcement of the interim dividend.

The excerpts said the fair market value of the shares of Crane Group’s are valuated at $9.92 to $11.56 a share ‘on a controlling and ex-dividend basis’, but lamented that Fletcher Building valued Crane shares at $9.05 to $9.45 per share bracket.

Excerpts of the report also advised Crane shareholders not to bite the offer of Fletcher as it lacks control premium provisions.

Upon launching the offer before Christmas, Fletcher tried to convince Crane shareholders that they would optimize their liquidity in Australian and New Zealand stock markets, Fletcher being the largest shareholder with 14.9 percent interest.

As excerpts of the report were released, Crane shares closed a final $9.58, up by 0.5 percent, while Fletcher shares ended $6.07, a 1.3 percent rise that eventually valued Crane shares at $9.54.

Crane Group’s revenue before interest and tax climbed by 29 percent to $39 million last week with net profit of $21 million, up by 17 percent.

 

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