The country’s largest building material provider Boral is believed to be in the process of selecting a defence adviser to wrestle with an “opportunistic” $7.9bn takeover bid from the Kerry and Ryan Stokes-backed Seven Group.
Boral had earlier hired Bank of America to explore options for its US-based operations and has the Royal Bank of Canada on board for a review of its US fly ash division.
But while the company’s chief executive Zlatko Todorcevski is known to be close to BoA, some say that other advisers could clinch the mandate.
It is worth remembering that Macquarie Capital used to advise Boral, although some believe it is an unlikely choice because it worked on its unpopular $3.5bn acquisition of the US-based Headwaters business in 2016.
Melbourne-based Flagstaff Partners has previously offered counsel.
Boral has also called on the services of Jarden Australia and Citi to assist with its share buy back, so some believe it is an open field when assessing which group winds up with the role.
Analysts on Tuesday backed a move by Boral to reject Seven’s $6.50 per share offer, which was in line with Boral’s closing share price the same day. The offer is expected to open on May 25 and run for a month.
Seven said that it wanted to raise its interest in Boral and would be satisfied if the offer resulted in it holding a stake of around 30 per cent of Boral.
One challenge for Seven, advised by Barrenjoey Capital Partners, would be if there was a dramatic macroeconomic change, causing Boral’s share price to plunge, prompting all of Boral’s shareholders to accept its offer.
But Seven has a clause in its deal that allows a way out if there is a material adverse change in conditions.
Some suggest that Seven, which owns a 23 per cent interest in Boral, has been placing pressure of Boral to sell its US assets and embark on a share buyback at a time that it needs to use its equity to invest in upgrades and its cement operations in NSW and Victoria and new technology.
Analysts at Morgan Stanley believe the bid will not be well supported by investors.
But they add that the offer would put a floor under the Boral share price and that the stock would trade ahead of the $6.50per share bid in the near term.
The offer equates to 22 times forecast 2022 net profit and eight times earnings before interest, tax, depreciation and amortisation.
Seven’s stake is likely to discourage a rival suitor coming forward, analysts say.
Takeover rules stipulate that the company can only increase its interest in Boral by about 3 per cent every six months via creep provisions without launching a takeover bid.
Morgan Stanley analysts believe Boral’s position will be improved by the expected sale of its assets in the US.
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