Kerry Stokes’ Seven launches billion-dollar bid for concrete maker Boral

Billionaire Kerry Stokes and his family want to buy the remaining share of building material company Boral that is not already owned by Seven Group, offering the concrete maker’s shareholders a cash and scrip deal valued at $6.05 a share that could go as high as $6.25.

Stokes’ Seven Group Holdings, led by son Ryan Stokes, 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.

Kerry Stokes’ Seven Group Holdings, led by son Ryan Stokes, currently holds 71.6 per cent of Boral.Credit: Louie Douvis

The offer is set to open on March 4.

The diversified company 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 recommends shareholders unanimously accept the bid. The bid would rise by a further 10¢ per share if it reached the compulsory acquisition threshold of 90.6 per cent, Seven Group said.

Seven Group said its offer was “best and final” and would not be increased.

If both circumstances occur, Boral’s shareholders will get an aggregate value of $6.25 per share, it said. A bid at that price values the concrete maker at about $6.9 billion compared with its Monday morning market capitalisation of $5.85 billion.

Analysts at Evans and Partners said Seven’s decision to mop up Boral came as a “surprise” given the diversified group’s decision last year to sell a 1 per cent stake at $4.90 a share after it claimed the company had reached full value.

“Despite the short-term dilution to our [earnings per share] forecasts, we suspect the move reflects management’s view that the upside to Boral’s earnings is much more than the market has assumed,” the analysts said.

They said if the bid was not successful, Seven would seek to delist Boral, change the board to be majority represented by its nominees and change Boral’s capital management approach.

Boral’s shares rose 3.68 per cent in trading on Monday after opening, to reach $6.06. The company earlier this month upgraded its underlying full-year earnings forecast to between $330 million and $350 million, a shift that pleased investors who, at the time, pushed its share price up nearly 9 per cent to $5.90.

Stokes’ company also confirmed it would not be buying any Boral shares for an amount above $6.25 for a year after the offer’s close, in an attempt to motivate any vacillating shareholders to sell.

Boral’s board recommended shareholders take no action following the bid’s announcement.

The company said in a statement to the ASX on Monday that a committee of Boral’s independent directors would meet to consider the offer and form a response.

“Once the offer opens, Boral will prepare a target’s statement responding to the offer, which will include the directors’ recommendation in relation to the offer and an independent expert’s report opining on whether the offer is fair and reasonable,” the statement said.

The statement would be sent to shareholders around mid-March, Boral said.

Seven Group is about 57 per cent owned by the Stokes family. As well as its major stake in Boral, the group’s diversified holdings also include industrial equipment firm Westrac, Coates Hire, a large chunk of ASX-listed oil and natural gas producer Beach Energy and a controlling interest in Seven West Media.

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.