Nervous Boral investors mull Seven’s sex and drugs Spotlight scandal

Brittany Higgins, right, outside the Federal Court last year. Picture: NCA NewsWire / Monique Harmer

What do people who make cement have in common with claims of sex, drugs and currying favour through trips to Lord’s?

Not a lot, unless this is an episode of The Sopranos. That might pose a problem for Seven Group as it tries to convince sceptical retail shareholders of Australia’s biggest building products supplier Boral to accept its $3.1bn, mostly scrip takeover offer.

Retail investors at Boral might have pause for thought about becoming Seven Group shareholders after watching sordid allegations of how its TV station Network Seven obtained an interview with Bruce Lehrmann about allegations he raped Brittany Higgins in Parliament House in 2019. Those rape charges were dropped and Lehrmann has always strongly denied the allegations.

Seven Group was already facing an uphill battle to convince retail investors after the Boral independent directors advised against accepting the offer.

Institutional shareholders are another matter, with Wilson Asset Management saying it will commit to selling its Boral shares into the takeover bid.

For those retail investors who were still undecided about Seven Group, the slow motion train wreck won’t help.

Seven Group was started by Kerry Stokes, who remains chairman of Seven West Media, where its Network Seven is housed, and his son Ryan has been taking over large swathes of the business.

Ryan is now chief executive of Seven Group, is also on the board of SWM and chairman of Boral.

Since Stokes became chair, Boral quickly sold $US4bn of US assets and appointed Vik Bansal as CEO with a mandate to refocus the underperforming business on its domestic cement, concrete and asphalt operations.

Bansal has undoubtedly been turning the company around faster than expected.

Shareholders loved the upside surprise, but none as much as Seven Group.

Its takeover approach surprised the market because it had sold 1 per cent of the company late last year for an average price of $4.90 but is now offering as much as $6.25 in shares and scrip to buy the 28.4 per cent of the company it doesn’t already own.

Fund manager Jun Bei Liu from Tribeca Investment – who is a fan of the financial prowess of both the Stokes family and Bansal – says the price is not high enough.

Liu, who owns both Seven Group and Boral shares, said she will not be selling into the takeover offer.

“The price is too low,” says Liu. “Seven’s bid does undervalue Boral’s potential, particularly the property value.”

The independent expert’s report by Grant Samuel attributed a value of as much as $1.6bn to Boral’s surplus property assets, which represents $1.26-$1.44 per Boral share.

Grant Samuel believes the fair market value of Boral is in the range of $6.50-$7.13 a share, and views the takeover bid to be “below this range”.

Boral shares traded at $6.05 on Thursday and are up 61 per cent over 12 months on the back of Bansal’s profit turnaround.

Latest data shows Seven Group’s shareholding has moved from 73 per cent of Boral at the start of this takeover attempt to 77.91 per cent now.

Liu says she expects Seven Group will have to slowly creep up the register, which it cannot do for 12 months after the initial bid, to eventually gain full control.

“What we will see Seven do is what it used to do with many other previous investments,” she says.

“It will creep a couple per cent every year. The share price will be a bit higher when they do come back.”

The investor has spoken to Bansal since the takeover and says he is committed to staying on as CEO regardless of the outcome.

“He is keen to stick around as the boss of the listed company,” says Liu, but we will stay if the Stokes family get their way.

“He is very committed to the business itself,” she says. “Seven Group brought Vik in, and they have a good relationship, so I don’t think he will leave and for Seven Group it’s in their best interest to really keep Vik as long as they can, because he has proven to be the person to run this business.”

While Tribeca will not be selling its Boral shares, Wilson Asset Management will, according to one of its fund managers, Sam Koch.

“Seven Group does a great job of investing in undervalued, quality assets which they then extract value from by running them better,” says Koch.

His view is that Seven Group has the “scope to accelerate the operational turnaround for sure”, with the caveat that Bansal stays to complete the turnaround.

As for the fears that retail investors who are already shaky given the independent directors have advised against accepting, Koch says he does not believe the current controversy involving Network Seven’s ethics will sour their views.

“I don’t think that’s the most important thing on their mind. Seven Networks is less than 1 per cent of the overall sum of the parts for Seven Group,” Koch said.

The takeover offer by Seven Group has been extended until April 18.

The claims about Network Seven came to light during Federal Court proceedings last week when the free-to-air network was unwillingly pulled into Lehrmann’s defamation case against rival Network Ten and one of its hosts, Lisa Wilkinson.

Upwards of 20,000 people tuned in to the court case daily to hear former Seven Network producer Taylor Auerbach give evidence about the credibility of ­Lehrmann.

Auerbach told the court that Network Seven reimbursed Lehrmann for money spent on cocaine and sex workers, as part of negotiations to lock in an interview on Seven’s Spotlight program.

A trip to Lord’s of London to watch the cricket was also flagged.

Auerbach also said Lehrmann gave Seven material from the brief of evidence in his criminal trial, in breach of court rules. Seven has denied the claims.

The whole story began when Higgins agreed to an exclusive interview with Network Ten, where she claimed an unnamed political staffer had raped her, and Network Seven locked in the interview with the unnamed alleged rapist, Lehrmann – who then sued Network Ten.

It’s a messy and toxic affair. Justice Michael Lee will hand down his verdict on Monday.