Revised NBIO of $1.90 to acquire S&T from Fletcher Building

15 October 2018
STU / NZX ANNOUNCEMENT


REVISED NON-BINDING INDICATIVE OFFER TO ACQUIRE STU RECEIVED
Steel & Tube’s Board advises that it has received a revised non-binding indicative offer from
Fletcher Building to acquire Steel & Tube and is arranging to appoint an independent expert

As advised to the market on 3 October 2018, Steel & Tube Holdings Limited (NZX: STU) had received
a non-binding, indicative and confidential offer (NBIO) from Fletcher Building Limited to acquire the
company at $1.70 per share.
The Board did not support the indicative offer, for a number of reasons including:
•
The NBIO of $1.70 per share significantly undervalues Steel & Tube’s Board’s view of the
company’s value.
•
The proposed acquisition would face challenging issues for clearance under the Commerce
Act that would take some time to work through, due to Fletcher Building’s vertical presence
and significant size in several steel product markets.
REVISED NON-BINDING INDICATIVE OFFER
Steel & Tube has received a revised NBIO from Fletchers of $1.90 per share, with provision for a
permitted dividend of up to 5 cents per share (imputed to the extent possible) (copy attached).
The company’s advisers’ (First NZ Capital) view on Steel & Tube’s intrinsic value is between $1.95
and $2.36 per share, excluding the company’s share of synergies.
The board remains of the view and has informed Fletcher Building that the company’s value exceeds
the revised price of $1.90 per share.
However Steel & Tube advises that in light of the revised offer the Board is commissioning an
independent expert report which will take 3-4 weeks, and will further consult its legal and financial
advisers about the implications of the revised offer. Fletcher Building has been advised of this (copy
attached).
Chair of Steel & Tube, Susan Paterson, said: “The revised NBIO from Fletchers does not prevent
higher value approaches from other interested parties. The Board will continue to evaluate
strategies and actions that deliver the best value to shareholders and is continuing to focus on
executing our turn-around strategy.”

ENDS

For further information please contact:
Mark Malpass
Steel & Tube CEO
Tel: +64 27 777 0327
Email: mark.malpass@steelandtube.co.nz

Level 7, IBM Building, 25 Victoria Street,
Petone 5012
PO Box 30543
Lower Hutt 5040
P 04 570 5000
F 04 570 2453
www.steelandtube.co.nz

15 October 2018


Bruce Hassall, Chair
Ross Taylor, CEO
Fletcher Building Limited
Private Bag 92114
Auckland


Dear Bruce and Ross


Revised Fletcher Building Limited NBIO to acquire Steel & Tube Holdings Limited

Thank you for taking the time to meet again on Friday afternoon, and for providing your
subsequent letter that evening with a revised non-binding indicative offer (NBIO).

The board has met over the weekend in conjunction with Steel & Tube’s financial and legal
advisers and have given the revised NBIO careful consideration.

The board remains of the view that the company’s value exceeds the revised price of $1.90
per share (plus provision for a permitted dividend of up to 5 cents per share payable at
completion). In addition:

1. Our advisers’ (First NZ Capital) view on Steel & Tube’s intrinsic value is between
$1.95 and $2.36 per share
1
, excluding the company’s share of synergies.

2. The permitted dividend does not adequately compensate shareholders for the
extended timeframe realistically required for you to seek your regulatory approvals.
The Board intends that Steel & Tube pay imputed interim and final dividends that in
total, having regard to our FY18 earnings guidance and our dividend policy, would
likely exceed the amount proposed.

The revised offer of $1.90 per share implies an Enterprise Value (EV) of $341m and is only
an 8.5x multiple of our long term sustainable earnings, assessed as FY21 EBIT of $40m.
Comparatively, excluding the company's share of synergies, our advisers' valuation range is
an implied EV of $346m to $414m.

While we understand you may have indications of some support from a couple of our
institutional shareholders, the board needs to consider the interests of all shareholders taken
as a whole, and the execution risks inherent in the revised NBIO.

Chapman Tripp continues to advise that the proposed acquisition would face challenging
issues for clearance under the Commerce Act, due to Fletcher’s vertical presence and
significant size in several steel product markets. A chart detailing our best estimates of
current market shares is on our website at www.steelandtube.co.nz/investor-update.


1
Valuation date as at 31 December 2018. Net debt projected to be $21.8m
at 31 December 2018.

2


We believe it is premature at this point to respond to you on the other terms contained in
your letter given our differences on value and likelihood of the regulatory approvals.
However, we would note that the suggested break fee does not adequately compensate
Steel & Tube for the execution risk and impact on the business, especially given the good
progress with our turn-around strategy.

Therefore, after some deliberation, the board has resolved to commission an independent
expert’s report on the merits of the NBIO, which will take 3-4 weeks. We will also obtain
further financial and legal advice.

We understand that you have recently had further discussions with some of our institutional
shareholders. So as to ensure a fully-informed orderly market for all of our shareholders, we
plan to release a market update announcement before market-opening on Monday
15 October, advising of the revised NBIO and the Board’s decision to seek an independent
expert’s report and further advice.


Yours sincerely

Susan Paterson Mark Malpass
Chair CEO
Steel & Tube Holdings Limited Steel & Tube Holdings Limited