The share price for Fletcher Building Limited [NZX:FBU] has fallen by over 2% today.
Fletcher is the largest construction material supplier in Australasia. With a strong presence in manufacturing, distribution and retail, it is one of the most prominent listed companies on the New Zealand Stock Exchange.
At the time of writing, Fletcher has a market capitalisation of $5.2 billion, and the share price is $6.10.
Why did the Fletcher Building share price decrease today?
Fletcher was keen to acquire Steel & Tube Holdings Limited [NZX:STU], a leading provider of steel products. Fletcher made an offer of $1.95 per share in cash and dividends, and overall, the deal would have been worth more than $340 million.
The intention behind this merger between Fletcher and Steel & Tube was to carve out a 50% market share dominance in New Zealand steel manufacturing and distribution.
Unfortunately, it’s now become clear that this deal will not proceed. In a key development, Steel & Tube shareholder Milford Asset Management sold its 15.8% stake in the company to New Zealand Steel, which is a subsidiary of Bluescope Steel [ASX: BSL] for $45.8 million.
This is a blocking action which effectively muscles Fletcher out of the bidding process. Right now, it is no longer possible for any one party to acquire 90% shareholding dominance.
In light of this setback, Fletcher has announced that it will abandon all further efforts to acquire Steel & Tube.
What’s next for the Fletcher Building share price?
At the moment, investors are still feeling the shockwaves from the failed merger.
However, we anticipate that the jittered nerves will soon settle, and the company will regain its market equilibrium.
The failure to acquire Steel & Tube is unfortunate for the short-term, but might have very little impact for Fletcher’s prospects in the longer term.
Editor, Money Morning New Zealand