Italy Nerves | Fletcher’s Bid for Steel & Tube

4 October 2018

Global markets were mixed overnight, amid signs that Rome would cut budget deficits and decrease its debt in the coming years, while US Treasuries yields hit multi-year highs and the dollar firmed as data pointed to another Federal Reserve rate hike.

Italy is back in the headlines, with renewed jitters over Italy's budget deficit as the European Commission warned of a Greek-style crisis looming in Italy. Concerns about Italy’s budget negotiations continued to weigh on the Euro (on speculation that Italy may drop the Euro), and are supporting safe-haven assets such as the US dollar, Japanese Yen and gold. The issues in Italy are worth keeping an eye on given the importance of Italy as a major member of the Eurozone.


Stock in Focus: Steel & Tube (STU:NZ)
Shares in Steel & Tube (STU) jumped +16% yesterday as it received a takeover bid from Fletcher Building which it has turned down for being too low.

Fletchers have offered $1.70 a share, or $284 million, and have the support of shareholders with 20% of the company's stock. CEO Ross Taylor says he will keep pursuing the company, but was coy on whether he will raise the bid. 

Steel & Tube shares are trading at a significant discount to the non-binding offer price, reflecting the fact that the offer is not a done deal, and needs to get approval from shareholders and the Commerce commission.

Fletcher shares dropped on the news, which has surprised the market (and us) in that they would look to spend quite a lot of their capacity in bidding for Steel & Tube. What makes the offer more surprising to us is that it comes at the same time Fletcher’s is selling off other divisions. 

We do not have full research coverage on Steel & Tube, but Members can read our full reports on Fletcher Building


Australia & New Zealand Market Movers

The Australian share market was in positive territory yesterday (ASX 200 index +0.32%) as higher commodity prices boosted local material and energy stocks. The listed gold miners dominated the market gains, as precious metal prices lifted on Tuesday night with gold and silver regaining some of their safe-haven appeal. In stock news, shares of Myer Holdings jumped 8% after its largest shareholder Premier Investments Ltd, chaired by billionaire Solomon Lew, asked Myer for a list of its owners, once again fuelling speculation of a takeover offer.


The New Zealand market was lower on Wednesday (NZX 50 index -0.35%), led by A2 Milk ater disclosing director Peter Hinton sold 25,000 shares at $11.91 apiece on September 26. The sale came in the wake of CEO Jayne Hrdlicka's share sale, which investors have criticised as being poorly communicated.


3 Things Markets Will be Watching this Week

1.             Trade related news-flow is likely to continue to feature in headlines.

2.             The Reserve Bank of Australia makes an interest rate decision on Tuesday.

3.             Important monthly US employment data (payrolls) is published on Friday.


Have a Great Day

Italy is back in the headlines, with renewed jitters over Italy's budget deficit as the European Commission warned of a Greek-style crisis looming in Italy.

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