Boral urges rejection of takeover bid by Kerry Stokes-backed Seven Group Holdings

Boral urges rejection of offer by Kerry Stokes’ Seven Group Holdings, saying it’s opportunistic and undervalues the company.

Boral CEO Zlatko Todorcevski. Picture: Jane Dempster

The chief executive of under siege building materials maker Boral, Zlatko Todorcevski, has made his case for shareholders to reject what he has termed a lowball and opportunistic takeover offer by billionaire Kerry Stokes, declaring his shareholders “deserve better” for their stock.

Unveiling Boral’s target statement in response to the $6.50 per share bid made by Mr Stokes’ Seven Group Holdings, which Boral’s independent board committee has urged investors to rebuff, Mr Todorcevski sought to undermine the motives, actions and value of the SGH offer.

“Seven Group Holdings’ offer materially undervalues Boral shares and is substantially less than what the company is worth, this is not just the view of the independent directors on our board but also the view of the independent expert,” Mr Todorcevski said at a press conference on Thursday.

The target statement reveals independent expert Grant Samuel & Associates concluded that Seven Group’s offer of $6.50 per Boral share is neither fair nor reasonable and is below its estimated fair market value of $8.25 to $9.13 per Boral share.

On Thursday shares in Boral closed at $6.83, down 0.7 per cent.

Mr Todorcevski described his working relationship with fellow Boral director Ryan Stokes, son of Kerry Stokes, as “very professional and collaborative” before the takeover was launched on May 10.

Ryan Stokes sits on the Boral board although he has recused himself from any involvement with the Boral board since the takeover was launched in early May and has not received board papers.

“Prior to that though it was a very professional and collaborative relationship, and I would expect that should continue once this is behind us,” Mr Todorcevski told The Australian.

He then moved to savage the Seven Group bid on Thursday, arguing Boral shareholders deserved better.

“The independent board committee believe that Seven Group is trying to increase its influence over Boral without paying fair value for it and we think our shareholders deserve better, anyone can make a bid for Boral, the offer should recognise the true value of the company both and now and into the future — the Seven Group bid fails on both accounts.

“The offer is clearly opportunistic and appears timed to take advantage of the strategic work we have already done to improve Boral’s outlook, when I took over 12 months ago my brief was straight forward, to turn this great company around and deliver value for all shareholders and that is exactly what we are doing.

“We have a clear unambiguous strategy to transform Boral into a much more agile, more resilient, more profitable company.”

The Seven Group takeover has helped spur Boral into action, as Mr Todorcevski reviews its business and could sell its $2bn US building materials arm. The target statement also identified 30 surplus properties held by Boral with a book value of $78m that Boral management believes could be worth as much as $850m.

Whether Mr Todorcevski gets his opportunity to continue the turnaround and put his plan into action, which includes the review of its large portfolio of 276 land holdings, remains to be seen as Seven Group chases down its prey.

Mr Stokes and his Seven Group group have steadily crept up the Boral share register from just over 22 per cent to recently approaching almost a 24 per cent stake in Boral’s issued capital as the building products company’s $700m share buyback helps inflate its own stake.

By the time the Boral buyback is complete Seven Group’s stake could tip 25 per cent. Seven Group has also been using creep provisions, a traditional modus operandi employed by Kerry Stokes, to accumulate greater ownership in the company.

Seven Group could then seek an extra seat on the board, a move which until now has been rebuffed by Boral.

In its target statement issued on Thursday Boral chairman Kathryn Fagg, who is set to step down later this year, wrote to shareholders to recommend they reject the offer for their Boral stock.

“The Boral independent board committee appointed Grant Samuel & Associates as the independent expert to give an independent opinion as to whether the Seven Group offer is fair and reasonable to Boral shareholders not associated with Seven Group.

“The independent expert has concluded that the Seven Group offer of $6.50 per Boral share is neither fair nor reasonable and is below the independent expert’s estimated fair market value of $8.25 to $9.13 per Boral share,” Ms Fagg said in her chairman’s letter.

The outgoing Boral chairman said the core focus of the board is to deliver value to all Boral shareholders and for all Boral shareholders to benefit from the future value it believes is available through Boral.

“We believe that any proposal to acquire control of Boral should be at a fair value.”

Last month businessman John Wylie’s Tanarra Capital attacked the Stokes-controlled SGH for an opportunistic $8bn bid for Boral and called on the construction materials giant to fast-track plans to secure a new chairman amid a challenge to its independence.

Boral calls Seven Group Holdings’ offer opportunistic. Picture: AAP

Ryan Stokes sits on Boral’s board. Picture: Britta Campion