Boral board delivers more value for shareholders before accepting Seven offer

The acrimonious battle for control of Boral appears over with its board accepting Seven Group’s bid, while delivering more value for shareholders.

Ryan Stokes, managing director of Seven Group Holdings.

Boral wasted no time in launching a share buyback on Friday as part of a suite of measures that helped get the at-times contentious $1.9bn takeover bid from Kerry and Ryan Stokes’ Seven Group Holdings over the line.

Boral’s bid response committee (BRC) made up of its three independent directors on Friday announced it was now recommending the bid, after some minor concessions from Seven and tweaks on the Boral side that will benefit shareholders.

These include a buyback of up to 5 per cent of Boral shares, allowing shareholders who want to exit before the takeover completes adequate liquidity to do so; a new, 26c per share franked dividend from Boral; and Seven committing to paying a cash component of $1.70 for the scrip and cash bid.

Previously Seven had said it would pay a minium of $1.50, with that increasing to $1.60 at an 80 per cent acceptance level – which Seven has almost achieved already – and $1.70 at 90.6 per cent, the level at which the bid would move to compulsory acquisition of outstanding Boral shares.

The tweaks led Boral’s independent expert, Grant Samuel & Associates, to change its recommendation from opposition to being in favour of the offer.

While there were a suite of measures that served to make the bid more palatable for Boral shareholders, the reality of remaining a shareholder in a company which was overwhelmingly dominated by Seven Group’s ownership was also cited as a reason to accept the bid.

Boral shareholders who accept the offer for 0.1116 Seven Group shares and $1.70 in cash will be paid and assigned their shares within seven days, the companies said on Friday.

The result will cap a rewarding 12 months for Boral shareholders, with the building products company’s shares trading at just $3.89 a year ago.

The takeover tussle between the two companies, which started on February 19, was at times acrimonious, with Seven Group firing shots at the Grant Samuel report commissioned by Boral, which it said contained “fundamental errors’’.

These errors, Seven said, directly ­affected the valuation range for Boral and the independent expert’s subsequent conclusion that the offer was not fair and reasonable.

That conclusion was relied on by the BRC, which urged the company’s minority shareholders to rebuff Seven’s offer in a target’s statement on March 19.

Boral shareholders who accept the offer for 0.1116 Seven Group shares and $1.70 in cash will be paid and assigned their shares within seven days. Picture: AAP

A statement released by the BRC at the time said Boral was “ahead of schedule in delivering on its ‘Good to Great’ improvement strategy and is only part way through this journey’’.

Grant Samuel had calculated a fair value range of $6.50-$7.13 for Boral shares while ascribing a value to the bid of $5.96-$6.39.

Seven Group argued there were a series of errors and miscalculations in the report which meant that it was “unbalanced, selective, and risks fundamentally misleading Boral minority shareholders’’.

As part of the restructured deal, Boral on Friday said it would pay a fully-franked dividend of 26c per share with a record date of 18 April, which will be deducted from the offer cash price, reducing it to $1.44 per share.

While reducing the headline amount of cash, the dividend payment would allow Boral shareholders to benefit from franking credits of 11.1c per share.

Shareholders who accept the offer will also be in line for a Seven Group dividend following the close of the offer, worth about 3.3c per Boral share, and 1.4c per share worth of franking credits.

“The total value receivable by Boral shareholders through the Seven Group offer now, should the Boral shareholder receive the Boral dividend and the Seven Group dividend, is $6.16 to $6.39 per Boral share plus approximately 13c per share in franking credits for Boral shareholders who are able to obtain the benefit of the franking credits,’’ Boral said in a statement to the ASX on Friday.

“The bid response committee asked the independent expert, Grant Samuel & Associates, to consider the package of measures agreed between Boral and Seven Group and the change in circumstances and advise whether these factors result in any change to its opinion.

“After considering these matters, Grant Samuel has formed the view that the Seven Group offer is now reasonable.’’

The BRC said all of the factors taken together, including Seven’s overwhelming majority shareholding in the company, informed its decision to change its recommendation.

“Given the circumstances outlined above, which have the potential to have an adverse impact on the ability of Boral to continue as a stand-alone listed company, as well as the revised Grant Samuel view that the Seven Group offer is now reasonable, the BRC believes that the offer represents the most attractive outcome available to Boral shareholders, particularly when

measured against the risks of remaining as a minority shareholder now that Seven Group has a total interest of 78.8 per cent in Boral,’’ the ASX was told on Friday.

Boral shares closed 1.5c per cent higher at $6.12 on Friday while Seven Group shares were 0.1 per cent higher at $40.07.

Originally published as Boral board delivers more value for shareholders before accepting Seven offer