Reliance Worldwide's Sell-Off Ends With a Takeover Bid That Validates the Bulls

Tariffs, copper costs and a manufacturing overhaul weighed on the stock, until Brookfield's 32% premium bid confirmed what value-focused fund managers had argued all along.

30 Sep 2026 · 4 min read

Reliance Worldwide fell more than 20 percent in a single quarter on tariffs, copper price volatility and softer US housing demand, before a US$4.75-a-share takeover proposal from Brookfield in August, a 32 percent premium, capped a dramatic reversal for the plumbing supplies maker, following months of buybacks and self-help that fund managers say the market had been undervaluing all along.

A rough start to the year

First Samuel described a soft first-half FY26 result in February, with earnings pressured by tariffs and weaker end-market demand in both the US and UK, though management emphasised strong cash conversion and active self-help to rebuild margins, leaving First Samuel of the view the business is actually stronger today than it was in April 2025. Perpetual Asset Management said the stock fell 21 percent over the following quarter, including a 9 percent drop on the interim result itself, as investors reacted negatively to disclosures about a potential shift from copper-based brass to stainless steel in certain plumbing fittings, a change First Samuel noted was driven by regulatory compliance considerations. By March, First Samuel said a 25 percent fall since the result, 12 percent of it since the outbreak of the Iran conflict, had become excessive enough that the board announced a share buyback, sending the stock up 8 percent for the week. Pendal Group confirmed the buyback, worth US$120 million and equivalent to around 5 percent of shares on issue, was read by the market as a reassuring signal on the outlook.

Copper price volatility and a manufacturing shift

Investors Mutual Limited described Reliance Worldwide as best in class in behind-the-wall plumbing fittings, with SharkBite as its key brand, trading at around 12 times earnings while transitioning from brass to stainless steel products, a shift driven partly by the volatility of copper prices making forward planning difficult. Wilson Asset Management reported the company announced a further stage of manufacturing streamlining in June, closing brass casting, forging and machining operations in Moorabbin and Braeside in Melbourne along with several smaller sites. First Samuel called the closure a useful, if uncomfortable, case study in why manufacturing capacity keeps shifting not just to China but increasingly to the United States.

The market overpriced the downside

Ten Cap argued the stock was a classic case of the market overpricing downside risk, with a potential downgrade already reflected in the depressed share price, and added to its position in April following reaffirmed guidance and resilient earnings, citing the defensiveness of Reliance Worldwide's repair-focused exposure and an attractive valuation despite softer US housing conditions. Allan Gray made a similar point about the sector broadly, arguing building-cycle-exposed companies like Reliance Worldwide may offer considerably more upside than Australia's favoured bank stocks, and said it had accumulated a modest position.

People think they're going to downgrade, I think there might be a small nudging down, but that share price is down significantly.

— Ten Cap, Article, April 2026

May brought a relief rally of 8.2 percent after a third-quarter trading update showed zero change to existing guidance, with no impact yet seen from the Iran conflict after the company pushed through a second UK price increase to offset higher resin costs, though management left the door open to potential FY27 impacts. Perennial Partners reported a further 23.7 percent rally in June on optimism that an end to Middle East conflict could ease inflation and bring interest rates down, noting the 30-year fixed mortgage rate of around 6.5 percent likely needs to fall below 6 percent to meaningfully stimulate US housing activity, the kind of tailwind several managers see eventually flowing through to Reliance Worldwide's repair and renovation-focused sales.

Then Brookfield arrives

LSN Capital Partners confirmed Reliance Worldwide received a US$4.75-per-share cash takeover proposal from Brookfield Capital Partners following several earlier approaches and an eight-week due diligence process, describing the bid as reinforcing the strategic value available in parts of the Australian market. Pendal Group noted the 32 percent premium overshadowed a weak FY26 result in which FY27 EBITDA guidance came in around 7 percent below consensus, driven by record copper prices and higher resin, freight and labour costs outpacing the benefit of the company's own price increases.

The proposal reinforces the strategic value available within parts of the Australian market.

— LSN Capital Partners, Monthly Report, August 2026

First Samuel, for whom Reliance Worldwide is one of the largest portfolio holdings, said takeovers are core to how it thinks about position sizing precisely because it values businesses across the medium term rather than on current earnings alone, a distinction it sees as central given Reliance Worldwide is currently working through genuinely weak cyclical conditions in US housing and tariffs.

What fund managers say they are watching next is whether Brookfield's approach progresses to a binding offer, how FY27 EBITDA guidance evolves as copper and other input costs move, how the brass-to-stainless-steel product transition and manufacturing consolidation play out, and whether the US rate cuts several managers are counting on materialise to lift the underlying housing repair and renovation cycle regardless of the takeover outcome.