FBR share price climbs amid Brickworks takeover rumours

Are these two businesses about to build a closer partnership?

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A group of three builders wearing worker overalls and carrying hard hats in their hands jumps jubilantly atopa rooftop space on a commercial building with an airconditioner shaft in the background and the sun behind a light cloud behind them.

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Key points

  • Investor interest in FBR is rising
  • The FBR share price is up 6% today amid reports of a possible future takeover approach
  • Brickworks has been building its position in the business

The FBR Ltd (ASX: FBR) share price is jumping, up 6.4% today.

For readers who haven't heard of FBR before, it is designing, developing, building and operating an automated and stabilised bricklaying robot called Hadrian X.

It continues to make progress. For example, in November 2021, it announced that it had executed a term sheet with GP Vivienda to supply its 'wall as a service' (WaaS) for between 2,000 to 5,000 homes in Mexico using the Hadrian X robot. FBR has also entered into a memorandum of understanding (MoU) with Liebherr-Mischtechnik. The MoU intention is to co-operate, industrialise and commercialise the next Hadrian X robot for the global construction market.

These promising signs haven't been missed by Australia's biggest brickmaker, Brickworks Limited (ASX: BKW).

Last week, it was revealed that Brickworks had increased its ownership of FBR from 7.16% to 11.94%. It paid around $6.5 million for this increased holding.

But now, there is speculation that the business is a takeover target, which could be boosting the FBR share price.

Brickworks to make a move?

Brickworks has been strategically building up its stake in the business. According to reporting by the Australian Financial Review, it could mean that an actual takeover offer is getting close.

The AFR reported that fund manager sources believe the FBR business "has always made sense" for Brickworks as a way for it to provide low-cost bricklaying. Particularly at a time when construction costs are increasing, which is hurting the margins of both the builders and building product producers like Brickworks.

How could this play out? Speculation is that Brickworks may aim to increase its shareholding to 20% of the business, "make the most of a few creep provisions," and then launch a takeover attempt.

It was suggested that the takeover approach could happen sooner rather than later. The newspaper also pointed out that FBR may need to raise more capital in the future to fund its ongoing operations and growth. This could enable Brickworks to buy more shares at a cheaper price.

Brickworks has previously taken part in a placement with FBR, raising $1.93 million, which helped it increase its shareholding of the business.

FBR share price snapshot

Over the last month, FBR shares have risen by 63%. The Brickworks share price is up 1.28% today, at the time of writing.

Motley Fool contributor Tristan Harrison has positions in Brickworks. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks. The Motley Fool Australia has positions in and has recommended Brickworks. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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