Beaten-up ASX 200 stock surges 12% on buyout rumour

This ASX 200 building materials stock has been struggling throughout FY24.

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Investors have pummelled ASX 200 stock Fletcher Building Ltd (ASX: FBU) over FY24, but the building materials company shot the lights out today.

The Fletcher Building share price hit an intraday high of $3.06, up 12.5% on yesterday's closing price. It retraced some of its gains to close the session at $2.96, up 8.82%.

However, even with today's gains included, the ASX 200 stock is down a whopping 35.7% over the past 12 months.

The stock was the second-biggest mover among ASX 200 shares behind Xero Ltd (ASX: XRO) today.

What pushed Fletcher Building shares higher on Thursday?

The share price gain follows a report in The Australian that US-based global investment firm Platinum Equity may be interested in buying the New Zealand-based company, which also has operations here.

The Australian reported that Gresham Advisory Partners, Platinum's financial advisor, is investigating a buyout of all or parts of the Fletcher Building business.

Platinum describes itself as an "alternative asset management firm that invests institutional capital from around the globe".

It owns 50 companies and specialises in private equity buyouts and investing in the private and public debt of underperforming and undervalued companies.

Platinum already owns other building materials companies. They include Cabinetworks Group, the largest independently owned manufacturer and distributor of kitchen and bathroom cabinets in the United States.

Last year, Platinum also bought the Australasia windows, doors and building products business of JELD-WEN Holding, Inc. (NYSE: JELD) for approximately US$461 million.

ASX 200 stock tumbles 36% in 12 months

As you can see from the chart below, Fletcher Building has had a rough 12 months.

In 2024, the ASX 200 stock has suffered two hefty share price tumbles.

The first was an 8.65% fall on 14 February, when the company emerged from a trading halt and released its 1H FY24 report.

Fletcher Building revealed a net loss after tax of NZ$120 million compared to a net profit after tax (NPAT) of $92 million in 1H FY23. The dividend was suspended.

The company issued FY24 Group EBIT guidance in the range of $540 million to $640 million. It said the mid-point assumed a continuation of materially weaker market conditions for the rest of FY24.

The company said market weakness was especially apparent in the New Zealand residential sector where volumes had declined 20%.

Management also said it would sell its Australian Tradelink business after deciding that "further ownership of the business is not in line with the strategic objectives of Fletcher Building."

This followed a full review of the business and a $122 million non-cash impairment and write-down in Tradelink's carrying value.

The company also announced that its CEO, Ross Taylor, had decided to retire and its chair, Bruce Hassall, would be standing down.

The next significant fall for the ASX 200 stock was on 13 May, when the company released a disappointing trading update and downgraded guidance.

The company said it expected to fall short of its EBIT (before significant items) guidance of NZ$540 million to NZ$640 million and now expected EBIT in the range of NZ$500 million to NZ$530 million.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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