Fletcher Building Sells Construction Division to VINCI

About Fletcher Building Limited

Fletcher Building Limited (ASX: FBU)  is one of Australasia’s largest building products manufacturers and distributors, with operations spanning New Zealand, Australia and selected international markets. The company supplies a broad portfolio of materials and systems across residential, commercial and infrastructure construction, including cement, concrete, aggregates, steel, insulation, pipes, laminates and building systems. Over its long operating history, Fletcher Building has played a central role in shaping construction markets across the region.

In recent years, however, the company has faced persistent challenges arising from capital intensity, project risk and earnings volatility within its construction contracting operations. Following a strategic review completed in 2025, management signalled a clear intention to simplify the group, strengthen the balance sheet and refocus on building products manufacturing and distribution. The announced sale of Fletcher Construction represents a pivotal execution step in delivering that strategy.

Details of the Transaction

Fletcher Building confirmed it has entered into a binding agreement to sell Fletcher Construction Holdings to VINCI Construction, a major international construction and infrastructure group. The agreed base purchase price is NZ$315.6 million, subject to customary adjustments for working capital and net debt.

The transaction includes potential earn-out upside of up to NZ$18.5 million, contingent on the final outcome of a small number of key contracts currently under negotiation. If achieved, this would lift the headline enterprise value of the transaction to NZ$334.1 million, representing a meaningful monetisation of the Construction Division.

The sale encompasses three core New Zealand business units: Higgins, an integrated national civil construction and roading business; Brian Perry Civil, a specialist civil structures and foundations contractor; and Fletcher Construction Major Projects, which delivers large-scale and complex infrastructure projects in partnership with public and private sector clients.

Strategic Rationale and Portfolio Simplification

Fletcher Building’s Managing Director and Chief Executive Officer Andrew Reding described the divestment as a significant milestone in executing the company’s long-term strategy. Over the past year, the company has consistently communicated its intention to exit higher-risk contracting activities and focus on capital-light, more predictable building products operations.

Construction contracting typically carries greater exposure to cost overruns, claims, labour constraints and cyclical infrastructure funding, all of which have weighed on Fletcher Building’s earnings and balance sheet in recent years. By divesting the Construction Division, the group materially reduces exposure to these risks, allowing management to concentrate capital allocation and operational resources on manufacturing, distribution and product innovation.

The transaction also contributes directly to Fletcher Building’s stated objectives of lowering debt and improving shareholder returns through a more focused, resilient business model.

Treatment of Legacy and Excluded Assets

While the core Construction Division is being sold, certain assets and liabilities are excluded from the transaction. Fletcher Construction’s South Pacific operations are excluded and are being addressed separately as part of the broader strategic review process.

In addition, Fletcher Building will retain responsibility for residual obligations associated with completed legacy vertical construction projects, including the New Zealand International Convention Centre project, as well as selected historic civil construction matters beyond their defect liability periods. The group expects to recognise additional provisions of approximately NZ$55 million to NZ$65 million for probable future claims related to these retained obligations, reflecting a reassessment of potential outcomes.

These provisions are separate from any potential litigation liability associated with NZICC, which is not included in the estimate.

Impact on Employees and Customers

Following completion, approximately 2,300 Fletcher Construction employees will transfer to VINCI Construction as part of the transaction. Management highlighted that this outcome provides continuity for staff, customers and project partners, while placing the business within a global group with deep expertise, financial strength and a long-term commitment to infrastructure development.

VINCI Construction has an extensive international track record and is already familiar with the New Zealand market. Its global–local operating model and experience delivering major infrastructure projects were cited by Fletcher Building as key factors underpinning confidence in VINCI as a long-term owner of the Construction Division.

Regulatory Approvals and Completion Timing

Completion of the transaction is subject to a number of customary conditions, including regulatory approvals from the New Zealand Overseas Investment Office and, if required, the New Zealand Commerce Commission. The transaction also requires counterparty consents under certain key contracts and the completion of internal restructuring to separate South Pacific operations from the Construction Division.

Assuming these conditions are satisfied, Fletcher Building expects completion to occur before the end of calendar 2026, with regulatory processes anticipated to conclude during the first half of FY27.

Industry Context

The divestment comes at a time of structural change across construction and building materials markets. Large, diversified construction groups globally are increasingly reassessing portfolio exposure to fixed-price contracting risk, while manufacturers and distributors benefit from stronger margins, pricing power and capital efficiency.

In New Zealand and Australia, infrastructure demand remains substantial over the long term, but delivery risk, cost escalation and labour constraints continue to challenge contractors. Against this backdrop, Fletcher Building’s decision to exit construction contracting aligns with broader global trends toward simplification and balance-sheet discipline.

Outlook

Following completion of the transaction, Fletcher Building will emerge as a more streamlined building products group with reduced earnings volatility and enhanced financial flexibility. Management is expected to prioritise debt reduction, operational efficiency and disciplined reinvestment in core product segments.

The sale also provides strategic clarity for investors, reinforcing Fletcher Building’s transformation into a focused manufacturer and distributor positioned to benefit from long-term demand for residential, commercial and infrastructure construction materials.