‘Not fair and not reasonable’: Boral rejects Seven’s takeover offer

Boral’s independent directors have rejected Seven Group’s takeover of the concrete maker, claiming the deal that values the company at about $6.9 billion was not fair or reasonable and failed to account for Boral’s billion-dollar surplus property portfolio.

Seven lobbed its cash and scrip offer valued at $6.05 a share, which could go as high as $6.25, a month ago, in the hope of acquiring the third of the building materials firm it didn’t already own.

Boral’s bid committee said shareholders should take no action on the takeover offer.Credit: Fairfax/Nine

Boral’s bid committee said shareholders should take no action after an independent expert engaged by the company concluded the offer was “not fair and not reasonable”.

The independent expert, advisory firm Grant Samuel, settled on a fair value for Boral between $6.50 to $7.13 a share, saying the company’s outlook was robust with a turnaround strategy ahead of schedule and only partly completed.

“We obviously disagree with their assessment strongly,” Seven’s chief executive, Ryan Stokes, said about the recommendation, adding the group’s offer was at a higher earnings multiple than recent and comparable transactions in the sector.

The concrete maker’s surplus property is valued at between $1.4 billion and $1.6 billion, equivalent to $1.26 to $1.44 a share, which the company says will deliver significant value creation to Boral shareholders in the future.

The building materials giant recently joined forces with property developer Logos to exploit its extensive property holdings by building an industrial estate on 450 hectares of a 1105-hectare former quarry in Deer Park in Melbourne’s north-western suburbs.

Seven Group, controlled by billionaire Kerry Stokes and his son Ryan, holds 71.6 per cent of Boral and is offering to buy the remaining 28.4 per cent at an initial offer of 0.1116 of Seven Group shares and $1.50 cash for every Boral share.

Seven’s offer opened on March 4. Filings lodged with the ASX on Tuesday show Seven’s holding has since crept up to 72.65 per cent.

The West Australian conglomerate said it would increase its offer by 10¢ cash per Boral share if it accumulated 80 per cent or more of Boral’s shares, or if the building material maker’s board recommended shareholders unanimously accept the bid.

Seven Group is controlled by Ryan Stokes (pictured) and his billionaire father Kerry.Credit: Jeremy Piper

The bid would rise by a further 10¢ a share if it reached the compulsory acquisition threshold of 90.6 per cent, Seven said, adding its offer was “best and final” and would not be increased.

“The independent expert has valued Seven’s offer at up to $6.39 per Boral share – a mere 1.5 per cent below the expert’s own range [which has been inflated by a speculative property valuation],” Stokes said.

Boral’s share price was up 1.1 per cent to $6.25 in afternoon trade.

Anthony Aboud, deputy head of equities at fund manager Perpetual, which holds just under 1 per cent of Boral, said the independent directors’ decision protected the interests of minority investors.

Aboud said he had respect for Ryan Stokes as an investor and using Seven scrip to buy out the Boral minorities was logical, but Perpetual believed Boral represented good value.

“Our view is that Boral owns a unique and hard to replicate set of assets with an excellent management team led by Vik Bansal which is early on in its turnaround strategy,” he said.

“We have carefully evaluated the Seven offer and recommend that shareholders should reject the Seven offer as it undervalues Boral. The independent expert has concluded that the Seven offer is neither fair nor reasonable, supporting the bid response committee’s view,” a spokesperson said.

“We encourage shareholders to remain with Boral and fully participate in the future value available through continued direct ownership of Boral,” the spokesperson said.

Grant Samuel said its judgement in relation to reasonableness was finely balanced, and for shareholders with a low tolerance for risk, there was a case for accepting Seven’s offer.

Seven’s bidder statement makes clear it may pincer Boral investors by seeking more board positions, capital management initiatives and even to delist the company if the offer fails.

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