Stokes uses ‘patience and persistence’ to grab Boral

Billionaire Kerry Stokes and his son Ryan have delivered a masterclass in ‘patience and persistence’ in their mop-up bid for the remaining stake in construction materials company Boral.

Kerry Stokes and his son Ryan have executed a masterclass in their mop-up bid for the remaining 28 per cent of Boral.

The Seven Group mop-up bid for the outstanding 28 per cent of Boral is the final stage in the

execution of a masterclass in what I would call the “Patience and Persistence, Creeping Takeovers” technique of Kerry Stokes and now also his son Ryan.

That’s, by the bye, no longer “Little Kerry” – an appellation I coined to distinguish him from “Big Kerry” – the late Kerry Packer, who was big, and I mean B-I-G, BIG, in all his appetites.

That included putting $7m on a horse he did NOT own, at 7-4 on. And losing. In a race in which a horse he did own, won.

I digress. Stokes is now, well and truly, the “only Kerry”.

Stokes’s Seven Group bought its first shares in Boral in March 2020, just as Covid was spreading its viral wings around the world.

A year later, it had “crept” to a 23 per cent stake.

When this bid is completed, all-but certainly at 100 per cent, he will have bought the rest of a very major business for a net outlay of just a few billion dollars and some peripheral equity in his Seven Group.

In mid-2021, Stokes launched his first formal bid for Boral. Although he was technically bidding for all of Boral, he said he would be happy if he got his stake up to only – a clearly controlling – 30-35 per cent.

That “wish” was entirely logical, as he was only bidding a little higher than market. There was no “takeover premium” offered.

The price was well below the independent valuation of Boral.

As the takeover unfolded, though, through the still “fear and loathing” end days of Covid, the shares rolled in.

Stokes, father and son, tweaked the offer price higher to accelerate the flow.

Seven Group ended with
70 per cent of Boral.

The extra 47 per cent had been acquired, if not at quite a “bargain basement” price, certainly way under normal takeover costs.

What had made it an absolute no-brainer was the $4bn pile of cash sitting inside Boral, following the sales of its US businesses.

After the takeover, the now Stokes-controlled Boral returned $3bn in cash to its shareholders. Some $2.1bn went to Seven Group, returning roughly half what it had paid to take control of one of Australia’s major businesses.

Fast-forward three years and Stokes has moved to buy the rest.

Again, under his “Persistence and Patience, Creeping” technique, he’s set the offer price higher than market, but not at a obviously generous level.

The bid is structured so that if he gets to 80 per cent, there’s another 10c. And if he gets to 90 per cent – at which level he can compulsorily acquire all outstanding shares, Boral holders will get a further 10c.

Either way Stokes and Seven win.

They creep yet higher in a Boral they already control. A Boral that sits at the centre of Australia’s lucrative building and infrastructure boom.

Or they get to the 100 per cent, and all of that, plus the benefits of full consolidation in the dynamic group.

Originally published as Stokes uses ‘patience and persistence’ to grab Boral