Boral rejects Stokes’ $6.50 takeover offer

Boral’s board has again recommended shareholders avoid the offer of $6.50 a share from Seven Group Holdings.

Boral is recommending that its shareholders ignore an opportunistic offer from Seven Group.

Boral’s board has again recommended shareholders in the conglomerate avoid the offer of $6.50 a share from Seven Group Holdings, as the Kerry Stokes-backed bidder told the market it had launched its formal pitch to Boral shareholders.

Seven Group said on Tuesday evening it had begun mailing out documents to Boral shareholders for its lowball offer, confirming the $8bn bid for the construction materials giant was a pitch to move its shareholding to 30 per cent.

As Boral’s board again warned shareholders to take no action on the offer, Seven Group told shareholders the bid – comfortably beneath Boral’s $6.74 closing price – offered a better option than the company’s pre-bid trading price.

“SGH believes that the offer delivers a premium relative to longer-term trading prices in Boral shares, certain value in the form of cash consideration and an additional source of liquidity for shareholders, without the need to incur brokerage costs that would otherwise be payable for any on-market sale,” Seven Group said.

The bidder’s statement effectively confirms widespread criticism that its offer was simply a way to step around rules that prevent it from using so-called “creep” provisions to acquire more than 3 per cent of Boral shares every six months.

“Given that its interest exceeds 20 per cent and that it has recently utilised its ‘creep’ cap­acity by acquiring an additional 3 per cent interest, SGH is currently restricted from acquiring additional Boral shares on market at this time,” Seven Group said.

“As a result, SGH bidder is making a takeover offer to all shareholders.

“In making the offer, SGH is seeking to increase its interest in Boral and would be satisfied for the offer to result in it holding a total interest of around 30 per cent of Boral.”

In a letter to shareholders ­released on Tuesday, Boral chairman Kathryn Fagg recommended they take no action on the Seven Group bid, saying the company would release a formal response in the second week of June, including an independent expert opinion on the company’s value.

“We are confident in Boral’s strategy and remain committed to our transformation targets set across the group to deliver value for all our shareholders,” she said.

Ms Fagg told shareholders the independent board committee established by Boral to review the offer – which excludes Seven Group managing director and Boral board member Ryan Stokes – believed the offer was “opportunistic, undervalues the company and unanimously recommends that you take no ­action”.

Seven Group’s move on Boral has been roundly criticised by other major shareholders – including John Wylie’s Tanarra Capital – as a means to cement control of the construction ­materials group without paying a premium.

“They’re playing the long game and it’s an opportunistic attempt to move into a position of effective control of the company,” Mr Wylie said on May 12.

Separately, Boral’s global rival, building materials major James Hardie, held an investor day in Chicago outlining its goal to shift from being a fibre cement producer to a premier, consumer-branded company “that offers endless design possibilities to exteriors and interiors of the home”.

The company said it planned to market directly to homeowners to create demand for its building products. Within the US there are more than 44 million homes that were more than 40 years old. This presented a “significant opportunity for re-siding and remodelling”, James Hardie told investors.