The Fletcher bid values Crane at $A740 million ($NZ983 million). The bid is offering one Fletcher share and $A3.43 for each Crane share, with the bid conditional on, among other things, the acquisition of 90% of Crane shares.
Fletcher, New Zealand's largest listed company, said it had acquired a 14.9% pre-bid stake in Crane.
The offer would be funded by the issue of 67.3 million Fletcher Building shares, totalling $A400 million, and bank debt of about $A340 million from an existing undrawn bank facility.
Craigs Investment Partners broker Peter McIntyre said Fletcher Building had lacked some credibility across the Tasman.
"By buying Crane, it will have a greater footprint in Australia and receive more support from institutions."
Craigs was supportive of the bid but saw both good and bad businesses within Crane, he said.
Forsyth Barr broker Tony Conroy said the Australian operations of Crane were the major source of its earnings.
Acquiring Crane would launch Fletcher as the leading plumbing and piping business in Australia and New Zealand.
"The New Zealand operations of Crane are substantially underperforming and Fletcher must see this as a key area of opportunity to improve.
"It was inevitable that Fletcher would make an acquisition and we are comfortable with the complementary blend of the two companies."
The full price being paid suggested that Fletcher must see substantial synergy benefits for Crane, he said.
Mr McIntyre said Fletcher's share price fell 3.2% on the news of the bid as investors realised there would be a dilutionary effect if the takeover was successful. The share price of Crane was up 19%. The Fletcher offer is at a premium of 28% to Crane's weighted average price in the past month.
Crane's share price has fallen from above $A10 in February.
Fletcher Building chief executive Jonathan Ling said the offer was an attractive opportunity for Crane shareholders to both receive cash and become shareholders in a larger and more diversified company.
Fletcher Building had delivered shareholders a total aggregate return of 435% since it listed as a separate company in 2001, compared to Crane's 93% over the same period.
"The combined group will have an enhanced presence and liquidity on both the Australian and New Zealand stock markets," Mr Ling said.
Crane traces its history back to 1867 and it expanded in the booming 1950s and 1960s.
In 1994, it expanded into New Zealand with the purchase of Tradelink Plumbing Supplies from Burns Philp & Co Ltd. That acquisition doubled the size of its plumbing supplies business.
Its New Zealand unit, Crane Distribution New Zealand, encompasses Mico Plumbing and Pipelines, MasterTrade and Corys, an electrical supply business, according to its website.
Fletcher Building's business units include Humes Pipeline Systems in New Zealand and Rocla Pipeline products in Australia. Fletcher Building also owns the Placemakers building materials supplier.
Crane divides its business into pipelines, trade distribution and industrial products.
Mr Ling said Crane's trade distribution business in plumbing and electrical supplies would complement Fletcher's trade distribution business.
In industrial products, Crane had a metal manufacturing and distribution business that would complement Fletcher Building's steel distribution business in New Zealand.
Crane had revenue of $A1.8 billion and earnings before interest and tax of $A68m in its 2010 financial year.
The company had been reducing costs and consolidating branches and reducing staff in New Zealand.
The takeover continues Fletcher Building's expansion in Australia. Fletcher Building said it would operate Crane as a new independent division.
Mr McIntyre said the Crane board met yesterday and would make an independent recommendation to shareholders.
