Steel & Tube Holdings hasn’t been won over by an increased takeover offer from Fletcher Building but will hire an independent expert to review the bid. 

Last Friday, Fletcher raised its non-binding offer to buy Steel & Tube to $1.90 per share, plus they will allow for the payment of a special dividend of 5 cents per share, from an earlier pitch of $1.70. The country’s biggest listed construction company also offered to pay a $3 million break fee if it can’t get approvals from the Commerce Commission and Overseas Investment Office. 

Steel & Tube’s board said the increased offer still falls short of its own valuation of $1.95-to-$2.36 a share, but that it will hire an independent expert to review the bid and take more advice from its financial and legal advisers. The shares last traded at $1.50, having traded at $1.34 before the earlier offer was made public. 

Chair Susan Paterson said the Fletcher bid doesn’t stop any other suitors making a more attractive offer. 

“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,” she said in a statement. 

The bid was seen as opportunistic by investors given Steel & Tube had only just raised equity at a deep discount to shore up its balance sheet after a series of impairment charges and restructuring costs pushed it outside its lending covenants. 

Fletcher has previously said it’s lower bid had support from Steel & Tube shareholders owning more than 20 percent of the stock. Steel & Tube chair Paterson and chief executive Mark Malpass acknowledged Fletcher had support from a couple of shareholders in their formal response, but said they need to consider the interests of all investors. 

Steel & Tube highlighted likely opposition from the Commerce Commission in its initial rebuffing of the offer, and reiterated that concern to Fletcher, saying its adviser Chapman Tripp thought the proposed acquisition would face opposition given the larger company’s vertical integration and size in several steel products markets. 

“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,” Paterson and Malpass said. “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.”

Fletcher shares last traded at $6.15. 

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