Fletcher Building will be untroubled to raise most of the $NZ750 million from big shareholders by the time the raising closes tonight and the shares are re-listed tomorrow.
Reaction from brokers across the Tasman continues to be positive, and from Australia as well.
Fletcher revealed in a statement on Wednesday afternoon that it had raised the first $NZ500 million from big shareholders.
But news emerged yesterday of a probe by the NZX and corporate regulators into a report in Fairfax Media late last week that Wesfarmers may have built a stake of 3% to 4% in Fletcher.
The Sydney Morning Herald reported on Friday cited sources close to Wesfarmers and saw Fletcher shares jump 14% to a high of $6.66 after the report.
No one would confirm or deny the holding, especially Wesfarmers and the final denial wasn’t forthcoming until Tuesday and the fund raising announcement (to make sure Wesfarmers wouldn’t be thought of having to pony up $NZ30 or so million in the fund raising?).
Now NZ regulators are checking the original report and its source to see if there was an intention to mislead the market.
According to NZ media reports NZX spokeswoman Hannah Lynch said the stock exchange operator would also look at trading ahead of Fletcher’s trading halt as part of its “routine surveillance processes” for characteristics of insider trading.
Fletcher shares went into a trading halt on Tuesday, ahead of its announcement that it would raise $750 million from existing shareholders to strengthen its balance sheet.
A further $NZ500 million line of credit has been arranged with three big banks
Shareholders will be offered the opportunity to buy one share for every 4.46 shares owned, at $NZ4.80 a share, a 23.4% discount to the closing share price on the NZX on Monday.
Ellerston’s Australian Share Fund singled out Fletcher Building as one of its “turnaround stories" in its January report to investors (http://www.scoop.co.nz/stories/BU1804/S00374/ellerston-capital-sees-fletcher-as-a-turnaround-story.htm).
Portfolio manager Chris Kourtis said Ellerston believed the company’s earnings would "improve over the medium term".
Ellerston Capital’s 5.13% (worth around $NZ220 million) stake in Fletchers is also partially held by its Ellerston Australian Market Neutral Fund, which said in March that it had added Fletcher Building and Adelaide Brighton to its portfolio because the companies were “underperforming the broader market.”
Ellerston will have the chance to put up more money to maintain its stake in Fletcher by taking up a further 8 million shares. Wednesday’s statement would indicate that has happened.
Market trading will very likely see big volumes of Fletcher shares sold and bought by big institutions as they lock in profits in the deeply discounted shares issued in the raising, while rebalancing their holdings at the same time.