Steel & Tube shares soar 21%

 Steel & Tube Holdings shares jumped 21 percent after the board knocked back an offer from Fletcher Building. 

The non-binding, indicative and confidential offer for $1.70 a share "significantly undervalues" the company, the board said. The bid was a 27 percent premium to yesterday's closing price, but since the announcement, the stock has shot up 28 cents to $1.62. 

Lower Hutt-based Steel & Tube has been under pressure after breaching a lending covenant earlier this year when impairment charges and restructuring costs pushed it into the red. That forced it to raise money at a deep discount and the shares had dropped 31 percent this year before Fletcher's interest became public. 

The company has overhauled its business under the leadership of Mark Malpass and the board and management are confident in the improving performance of the company, it said.

“The fact that Fletchers has made this indicative offer speaks to our reputation and the strength of our business. Obviously, Fletchers sees a lot of value in our business and its future potential as the benefits of our turn-around strategy start to become clear… as do we," chair Susan Paterson said in a statement. 

Fletcher Building was not immediately available for comment. Fletcher shares slipped 0.3 percent to $6.56. 

In late September, Steel & Tube reaffirmed guidance for earnings before interest and tax of $25 million in the year ending June 30, citing new customer contracts and progress with efforts to streamline its business and cut costs. That's up from earnings of $16.5 million in the June year just ended, excluding $54 million of write-downs and restructuring costs. 

The board said it also didn't support the offer as it would need clearance under the Commerce Act, which would take some time to work through due to Fletcher’s vertical presence and significant size in several steel product markets.

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