Fletcher Building Sells Tradelink to Focus on Core Business

Highlights:

• Strategic Sale: Fletcher Building Limited (NZX: FBU) sells its Australian plumbing business, Tradelink, to Metal Manufactures Pty Limited for AU$170 million to focus on core operations.
• Financial Impact: The transaction includes a cash payment of AU$160 million and AU$10 million deferred, with expected non-cash impairments and costs totaling over AU$62.5 million.
• Debt Reduction: Proceeds from the sale will be used to reduce Fletcher Building's debt, aligning with the company's long-term strategic goals.

Strategic Divestment Aligned with Long-Term Goals

Fletcher Building Limited (NZX: FBU) has announced the sale of its Australian plumbing supplies and distribution business, Tradelink, to Metal Manufactures Pty Limited (MM) for AU$170 million. This move comes after a strategic review concluded that Tradelink, despite its strong market position, does not align with Fletcher Building's long-term objectives.

Transaction Details and Financial Impact

The sale agreement includes a cash payment of AU$160 million, expected by September 30, 2024, with an additional AU$10 million deferred, contingent upon achieving specific separation milestones over the next two years. The transaction, which is free of regulatory hurdles, is expected to be finalized by September 2026.

Fletcher Building anticipates transaction and stranded costs of approximately AU$10 million and separation costs totaling around AU$20 million over the two-year period. Consequently, the company expects to record a non-cash impairment of about AU$32.5 million for Tradelink in its FY24 accounts. Additionally, a NZ$54 million non-cash loss will be recognized from the derecognition of the Foreign Currency Translation Reserve balance.

Focus on Core Businesses

Fletcher Building’s Acting CEO, Nick Traber, expressed satisfaction with the agreement, stating that MM is an ideal new owner for Tradelink, given their successful history in the Australian trade distribution sector. The sale allows Fletcher Building to concentrate on the performance and growth of its core businesses, with the proceeds being used to reduce the company's debt.

Traber also extended his gratitude to the Tradelink team, customers, and vendors for their dedication and support, wishing them continued success under MM's ownership. Fletcher Building is set to release its FY24 annual results on August 21, 2024.

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