Fletcher Building is selling its stake in metal recycling company Sims Pacific Metals for $42 million as part of its new strategy to refocus on core businesses.
The half-share will be sold to its partner in the Sims Pacific joint venture, Sims Metals Management, Fletcher said, and total proceeds are expected to be between $50 million and $60 million as the purchase price is "subject to a working capital adjustment which will be finalised post acquisition". The joint venture was established in 1992 and is New Zealand’s largest metal recycling company.
Last week, the company set out its five-year strategy to refocus on core businesses, stabilise the construction division, expand in Australia and exit non-core operations. From July 1, it will be restructured into seven new divisions, from five currently, including a stand-alone unit in Australia which could grow over the next five years to equal or exceed the size of Fletcher's New Zealand operations. Fletcher is also selling its Formica and Roof Tile businesses.
The company's shares recently traded at $6.99, down 0.1 percent in the first few minutes of trading today and have fallen 3.8 percent this year.
ASX-listed Sims said in a separate statement the deal will immediately add to earnings in the 2019 financial year, with group chief executive Alistair Field noting "the acquisition is consistent with a key strategy of disciplined growth through complementary acquisitions in our core markets".
The joint venture operates nine recycling facilities, including two metal shredders, and employs more than 170 staff, handling 350,000 tonnes of metal recycling a year.