The CSR board says it knocked back an earlier offer before $9 bid

CSR has opened its books to French company Saint-Gobain and says the latter’s $9 per share bid followed an earlier ‘indicative offer’.

Building products companies are in buyers’ sights.

French company Saint-Gobain’s $9 per share non-binding takeover offer for CSR comes in well above analysts’ pre-bid price targets for the company, with CSR on Thursday saying it had knocked back an earlier proposal.

Morgan Stanley’s pre-bid price target for CSR was a lowly $5.60 per share and Goldman Sachs, while rating it a ‘Buy’, had set its target at just $7.10.

There has been a flurry of takeover action in the Australian building materials sector recently, with Seven Group’s $2bn proportional takeover for Boral Group to mop up the shares it does not already own in the company launched this week, and global player CRH looking to take AdBri private along with major shareholder Barro Group.

This is despite some uncertainty for the sector, with Morgan Stanley saying “We continue to expect a meaningful downturn in Aus resi activity as backlogs are worked through and activity reflects weak lead indicators’’.

“Longer term we see favourable dynamics supported by under-supply of housing.’’

Media reports sent CSR shares sharply higher on Wednesday before the company asked for trade in its shares to be halted midafternoon.

Early on Thursday the company confirmed what market watchers by then had known for some hours - that Saint Gobain had a non-binding, $4.3bn proposal on the table.

CSR told the ASX on Thursday the $9 per share proposal “follows an earlier indicative offer and a period of negotiation, which included the provision of value impacting due diligence’’.

“Following review of the proposal, the CSR board unanimously resolved to pursue the proposal.

“CSR is currently providing Saint-Gobain with confirmatory due diligence access to progress to a binding transaction at an agreed offer price of $9 per share.

“CSR will make no further comment at this time’’.

Sources have told The Australian the likely play for Saint-Gobain would centre on CSR’s plasterboard operation, and it would sell the remaining bricks operation to a party such as Austria’s Weinerberger, which sells bricks in Europe and the US.

CSR’s main division is building products, however it also has a property division and owns a 25 per cent stake in the Tomago aluminium smelter in NSW, alongside majority owner Rio Tinto and AMP.

The Saint-Gobain deal would require Foreign Investment Review Board approval.

Morgan Stanley also noted, “We understand that the aluminium ownership structure includes certain rights under a change of control or sale’’.

The deal structure would involve a 25c per share dividend being paid to shareholders, and deducted from the offer price, making it effectively $8.75.

CSR shares were trading well short of this level on Thursday, up 4.65 per cent at $8.32.

The stock closed at $6.77 on Tuesday before the bid rumour started filtering out.

The proposal is subject to due diligence and a unanimous recommendation from the CSR board, as well as shareholder approval.

“The CSR board notes that there is no certainty that the proposal will result in a binding offer for CSR,’’ the company said.

Originally published as The CSR board says it knocked back an earlier offer before $9 bid