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Investors split as Seven Group’s Ryan Stokes joins Boral board

Seven Group has been given two Boral board seats to reflect its 19.9 per cent stake in the construction materials company.

Seven Group CEO Ryan Stokes has won a spot on Borals board. Picture: Nikki Short
Seven Group CEO Ryan Stokes has won a spot on Borals board. Picture: Nikki Short

Boral’s decision to hand billionaire Kerry Stokes’ Seven Group two board seats has divided shareholders, with Argo Investments backing the move, given its sizeable stake, while John Wylie’s Tanarra Capital fears the decision may hand Seven too much influence.

Seven was given two Boral board seats to reflect its 19.9 per cent stake in the construction materials company, with chief executive Ryan Stokes and finance boss Richard Richards appointed directors as part of a broader shake-up at the Sydney-based company.

Rob Sindel and Deborah O’Toole will also join the board.  The Seven Group conglomerate, controlled by Kerry Stokes, has been boosting its exposure to Boral ahead of an expected strategic shake-up in October which could pave the way for the sale of its underperforming US business.

Argo Investments managing director Jason Beddow said Seven’s clout would be hard to ignore, although he expects the conglomerate will be in for the long haul and give chief executive Zlatko Todorcevski time to make changes to the company.

Boral’s underperforming US unit holds less appeal for Seven than its Australian division, and the conglomerate is thought to be open to a potential divestment to unlock value for investors. “It changes the dynamic of the board room pretty significantly. I know they are non-executive directors and everyone has an equal vote but they are a fairly influential group based on history and other things they’ve done in corporate Australia,” Mr Beddow said.

“They have big swings and they get involved but they can also be pretty patient as well. So I think they’d err on the side of let’s get the best outcome rather than let’s get the quickest outcome.

“In the real world things move a bit slower than numbers up and down on a screen.”

Still, the move for Seven to gain two director roles was not backed by Mr Wylie‘s Tanarra Capital investment vehicle, which holds nearly 5 per cent of Boral shares.

The investor is understood to have favoured one board seat for Seven to reflect its 19.9 per cent stake. Mr Wylie presented a break-up plan to Boral chair Kathryn Fagg in December that was rejected by its board, calling for the company to sell its US building products business for between $4.6bn and $5.3bn.

Boral said the two Seven executives were appointed on Monday to reflect its sizeable shareholding.

“Boral considers that both nominees have experience suitable for directors and will add to the skills and capability of the board. Both nominees have acknowledged the importance of acting in the interests of all Boral shareholders and managing any conflicts of interest carefully,” Boral said in a statement.

Seven will have to give up its board seats should its Boral stake fall below 15 per cent under an agreement between the two companies.

Seven’s success in gradually building up a 30 per cent stake in Beach Energy, where it holds two board seats, was expected to serve as a blueprint for its strategy on Boral. There are expectations it will creep up the Boral register to gain both influence on strategy and expected growth from an Australian infrastructure boom.

Former CSR chief executive Rob Sindel has also been appointed to the Boral board along with Deborah O’Toole, who has pledged to reduce her current commitments, which include Asciano, Credit Union Australia, Sims Metal Management and Alumina.

All four directors will stand for election at Boral’s annual general meeting on October 27.

Ms Fagg said she will stand for re-election in the same role at the AGM, while two long-serving directors, John Marlay and Eileen Doyle, intend to retire.

“With the recent appointment of Boral’s new CEO and managing director, Zlatko Todorcevski, board renewal has also been a critically important focus for us,” Ms Fagg said.

“We said we were looking to recruit directors with deep industry experience and finance capability and that we were taking a rigorous approach to board succession and planning. It is very pleasing to be delivering on those plans with the appointment of such highly capable, experienced and well-respected directors to our board.”

Ms Fagg said Boral was focused on resetting the company under Mr Todorcevski’s leadership.

“After two years as Boral’s chairman I will be seeking shareholders’ support to continue in the role and I will work to provide leadership stability through this period of renewal.”

Boral gave outgoing chief executive Mike Kane a $2m golden handshake as it reels from the financial fallout of an accounting scandal in its US windows business. Boral shares rose 5.8 per cent to $4.54 on Monday.

Perry Williams
Perry WilliamsBusiness Editor

Perry Williams is The Australian’s Business Editor. He was previously a senior reporter covering energy and has also worked at Bloomberg and the Australian Financial Review as resources editor and deputy companies editor.

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Original URL: https://www.theaustralian.com.au/business/companies/seven-groups-ryan-stokes-wins-boral-board-spot/news-story/56e66bcc83c8e0d4b1fef46880a53480