Instos plan board revolt as Boral’s US pain deepens

Boral’s institutional investors have discussed a plan to shake up the board of the building materials giant.

A Boral plant in Sydney. Picture: AAP

Boral’s institutional investors have discussed a plan to shake up the board of the building materials giant as concern grows over the group’s underperformance and strategic direction.

It’s understood Boral’s major shareholders have discussed a plan to convene an extraordinary general meeting of the company aimed at rolling the board.

Several of Boral’s top 10 investors have been in discussions on the topic of board renewal ahead of the departure of long-serving chief executive Mike Kane in August after its annual results.

The Australian understands Boral chairman Kathryn Fagg has held talks with Boral investors this week and is understood to be aware of the disquiet and the potential push to requisition an EGM.

Several institutional investors contacted by The Australian said one option could involve the appointment of Boral shareholder and activist John Wylie to the board as a director.

However, sources close to Mr Wylie denied he was involved.

Boral said it would not comment on the market speculation. Its major investors include Legg Mason, Perpetual, Argo, Mr Wylie’s Tanarra Capital and hedge fund L1 Capital.

Mr Wylie’s Tanarra Capital investment vehicle, which holds nearly 5 per cent of Boral shares, presented a break-up plan to Ms Fagg in December which was rejected by its board.

It called for Boral to sell its US building products business for between $4.6bn and $5.3bn.

A potential disposal of the North American division along with its USG Boral Asia joint venture has also been canvassed by investors with their preference to solely focus on the company’s Australian unit where returns are much higher.

The move by renegade shareholders has been timed to capitalise on growing unrest among institutional investors over its growth path and frustration over the prospect of writedowns at its North American business following its $US2.6bn ($4bn) deal to buy Headwaters in 2017.

The Australian revealed on Wednesday a $US450m lawsuit by Billy Robinson, the former owner of the Krestmark windows business it acquired, adding to investor concerns after a financial scandal stemming from its US windows unit was disclosed in December.

Boral said it would vigorously defend the legal claim and said the “exorbitant damages” claim was designed to distract from his own conduct and Boral’s legal claim against him.

Boral says Mr Robinson is seeking to bring claims against Headwaters Incorporated, Boral USA, Boral Industries and Boral Limited despite the fact it had no ownership interests in Headwaters until May 2017.

It noted the court had to date rejected Mr Robinson’s attempts to have the Boral case against him dismissed.

Boral shares have recovered from a year-to-date low of $1.79 on March 23, but have still shed 43 per cent of their value since January 1.

Argo Investments, which owns just under 1 per cent of Boral, said it was too early to say whether a board break-up was justified. “Clearly the US acquisition did not go to plan and current management are on the way out anyway, which the board has ticked off,” Argo managing director Jason Beddow said.

Mr Kane is due to depart in August although Boral’s board has yet to find a successor and top North American executive, David Mariner will leave the company next month.