WELLINGTON (Reuters) - Fletcher Building <FBU.NZ> has agreed to sell the Formica Group to Netherlands-based Broadview Holding BV for $840 million as New Zealand's largest builder streamlines its business, sparking a rally in its shares.
Fletcher Building, which said on Tuesday the sale marked the end of its plan to sell non-core assets, also confirmed its intention to reinstate dividends in its 2019 financial year.
Shares in the company jumped 6.83 percent shortly after the market opened to a one-month high of NZ$5.16, but later pared some of their gains to trade around NZ$5.05.
"Our five-year strategy is to refocus Fletcher Building's capital and capability behind our New Zealand and Australian businesses, with building products and distribution at our core," said Chief Executive Ross Taylor, adding he expected the deal to be completed by the end of the 2019 fiscal year.
Grant Williamson, director of Christchurch-based investment advisory firm Hamilton Hindin Greene, said that investors were welcoming the strong price for Formica and the prospect of a dividend payment.
"A couple of good bits of news there and obviously the stock has come up from a pretty depressed level so we've got a few bargain hunters coming into the market," he said.
Fletcher Building shares have fallen more than 30 percent since the start of the year as the firm announced cost-overruns in its commercial construction unit.
The builder is working to reset its strategy after bungling New Zealand's biggest construction boom in living memory with a series of cost blow outs, that have also prompted Fletcher Building to start to wind down its Buildings and Interiors unit.
It announced in April a NZ$1.25 billion ($920 million) refinancing plan and the proposed sale of Formica as well as its steel roofing tiles business, which was completed in November.
Formica designs, manufactures and distributes surfacing products for commercial and residential applications. Its sale was still subject to regulatory approval, Fletcher said.
The company also flagged that it would restart its dividend payments with an interim dividend to be declared upon the finalisation of half-year results in February, after previously cancelling its dividend for the second half of the 2018 financial year.
"Given the expected settlement timing of the Formica sale, the FY19 dividend is likely to be weighted towards the final dividend," the company said in a statement.
(Reporting by Charlotte Greenfield in WELLINGTON and Aby Jose Koilparambil in BENGALURU; Editing by Mark Potter/Mark Heinrich)
