The share price of New Zealand contractor Fletcher Building jumped 7% today after it announced a deal to sell its Formica Group subsidiary to Dutch laminate maker Broadview Holding for US$840m.
The company is reorganising itself following a year in which it lost 30% of its market as a result of a series of cost overruns in its commercial construction unit, which it blamed in part on the rising cost of labour caused by the country’s construction boom.
It has since launched an $860m refinancing plan, reduced its construction activity, and has sold off units.
Ross Taylor, the chief executive of Fletcher, said in a press statement: "The divestment of Formica completes our strategy to exit non-core businesses having already completed the sale of Roof Tile Group in November 2018. Our five-year strategy is to refocus Fletcher Building’s capital and capability behind our New Zealand and Australian businesses, with building products and distribution at our core."
He added: "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 FY19."
Broadview Holdings, which is based in Hertogenbosch, commented that Formica was invented in 1913 as "the original high-pressure laminate" and that the purchase was a good fit with its strategy.
Formica has factories in North America, Asia and Europe, employs 3,400 people and had sales of $713m in the last financial year. Broadview has some 2,900 employees worldwide with combined sales of about $800m.
Fletcher Building said it would reinstate its dividends in FY19, commencing with an interim dividend to be declared upon finalisation of the company’s half-year results on 20 February 2019. It said this indicated the management’s confidence in the company’s ability to return to profitability over the course of the year.
Image: The original high-pressure laminate, seen here in its white marble herringbone form (Formica)