Shares in Fletcher Building have jumped by more than 10 percent today, following unconfirmed rumours that the Australian conglomerate Wesfarmers has bought a stake in the business.
Photo: SUPPLIED / Fletcher Building video
The Sydney Morning Herald has reported unnamed sources saying Wesfarmers, which owns the Bunnings building products and homeware chain, has bought a stake of about 3 or 4 percent in Fletcher Building, which has Placemakers.
Fletcher Building has become a potential target after its share price has slumped by nearly a third over the past year because of its well publicised losses on major building projects.
It is currently talking to its lenders about new borrowing conditions, and there has been speculation that the company may need to sell assets or raise cash in other ways to beef up its finances.
"We are not aware of a shareholding in the name of Wesfarmers in Fletcher Building," a Fletcher Building spokesperson said.
The Perth-based Wesfarmers has a wide range of assets including retail chains Kmart, Target and Officeworks, supermarket chain Coles, and coal mining interests.
It is currently looking to sell Coles and also divest its coal mines.
There is no suggestion that Wesfarmers might make a full take-over bid for Fletcher Building, but when it sells Coles it will have a significant warchest to invest in new assets.
However, it's likely the competition regulator would take a close look at any proposal, in particular any tie-up between Placemakers and Bunnings.
Separately, an investment analyst has upgraded his rating for Fletchers because many of the issues afflicting the company will likely be resolved over the coming year.
"Fletcher Building is a house in need of repair, and not without risk," wrote Matt Henry of Forsyth Barr in a research note.
"However, at current levels, we expect the stock price will be rewarded as uncertainties are addressed/pass: debt renegotiations, potential index changes, loss making construction projects, and likely asset sales repairing its balance sheet."
While a Fletcher's spokesperson denied any knowledge of Wesfarmers buying shares, Fletcher Building stock soared by more than 10 percent, ending the day at $6.43 after opening at $5.84 this morning.
