The Rank Group, owned by billionaire Graeme Hart, is said to be lining up its building supplies business Carters for an initial public offer (IPO).
The Australian Financial Review’s (AFR) Street Talk column reported that Rank is considering spinning off and listing its building materials businesses, Carters and Carter Holt Harvey, on both the ASX and NZX.
Forsyth Barr, which was named alongside Australian investment bank Barrenjoey as being hired to drum up investor interest in the IPO, declined any comment on the report.
However, the AFR reports that the new entity, which would be packaged up as the Building Solutions Group, will likely be dual-listed on the ASX and NZX.
Building supplies retailer Carters is headquartered in East Tamaki and operates 49 stores and frame and truss plants throughout New Zealand. The wood product business, under Carter Holt Harvey (CHH), is the market leader in the supply of structural timber and engineered wood products.
Fund managers said the combined business had recorded A$1.55 billion (NZ$1.67b) in revenue, with about A$150 million in earnings before interest and tax for the last financial year.
It is being pitched at a value of more than $1 billion, with about $500m of that available for investors.
Rank shelved plans for a Carters IPO in 2015, in the face of uncertain equity markets at the time.
That was after paring back the listing to include only the Carters' building materials store arm, valued at about $200m. It had previously indicated the IPO would cover all its timber processing as well, and that part of the business would seem to be back on the table.
In the meantime, CHH has been facing a contingent liability as a result of claims brought by the Ministry of Education for hundreds of leaky schools, with the ministry claiming faulty cladding.
That long-running case was cut short last October, with CHH cutting a deal with the ministry for an undisclosed amount.
Peak of earnings cycle?
Rank paid $3.31b for CHH – then NZ’s biggest forestry company – in 2005, with Hart selling off 250,000 hectares of its forestry holdings and dairy farmland scarcely a year later, for about $1.5b.
In 2014, Rank also sold CHH’s trans-Tasman pulp and paper holdings, including Kinleith Mill, Tasman Mill and the Penrose paper mill, to Japan's Oji Paper Company, for another $500m.
Shane Solly, portfolio manager with Harbour Asset Management, said it was also a “logical time” to bring the firm to market, given the tailwinds through the building sector.
“Firms are reporting some pretty solid returns at the moment, so that’s a good starting point for an IPO.”
However, it is "early days" and investors would be looking carefully at the fundamentals, including how well the firm is run, with some headwinds starting to come through as the economy slows down, and bottlenecks constraining the sector.
“So as an investor, you start thinking, what happens next. The market is wary that it may have seen the best of the earnings cycle, after a strong period across both commercial and residential demand.”
Reflecting that “wariness”, Fletcher Building hit a one-year low of $6.23 on Friday.
Steel firm Vulcan Steel, which began trading on the ASX and NZX last November, is also off its recent highs, currently trading at a near low of $9.11 after hitting a high of $11.01 in early January.
