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Boral releases fourth statement as Seven Group raises Offer

Boral offer

 

Boral chairman Kathryn Fagg has put her name to a Fourth Supplementary Target’s Statement, urging shareholders to reject Seven Group’s latest update to its Offer to buy more shares in the company after it secured a 29.5 per cent stake on 1 July.

On 1 July, Seven Group Holdings (SGH) announced the conditions to its First Conditional Increase had been met, having achieved a 29.5 per cent stake in Boral Limited. It increased the consideration under the Offer to $7.30 cash per Boral share. The SGH Offer Period has now been extended to close at 7:00pm on 15 July, 2021.

As part of a Second Conditional Increase, SGH has stated that it will increase the consideration under the Offer to $7.40 cash per Boral share if its aggregate interest in Boral shares increases to 34.5 per cent or greater prior to 5:00pm on 7 July,2021.

The 15 July deadline will only be extended if SGH can secure a greater than 50 per cent stake in Boral.

In response to these conditional increases, Boral’s Independent Board Committee, led by chairman Kathryn Fagg, has issued a Fourth Supplementary Target’s Statement, again urging its shareholders to reject the revised SGH Offer. It cites four reasons:

  1. The Offer is “materially below” the assessment of value of between $8.25 and $9.13 per share (including a premium for control) identified by independent expert Grant Samuel & Associates, particularly on the back of the recent divestment of some of Boral’s North American buildings products businesses. In addition, and as noted in the First Supplementary Target’s Statement dated 21 June, 2021, Grant Samuel advised Boral that the final price agreed for the sale of its North American building products business of $USD$2.15 billion ($AUD2.88 billion) exceeds the $USD1.8 to $USD2.0 billion ($AUD2.41 to $AUD2.68 billion) valuation range attributed to it in its Independent Expert’s Report.
  2. Boral’s renewed strategy is to continue to unlock significant value in the near-term from potential divestment of assets, notably in North America, and to drive value creation and earnings growth, including through its transformation program.
  3. The SGH offer is opportunistic and designed to take advantage of an improving outlook for Boral.
  4. SGH is attempting to increase its influence over Boral without paying fair value for it. According to the Fourth Target’s Statement, the Second Conditional Increase at $7.40 per share does not reflect a sufficient premium for increased control.

As part of point 2, the committee strongly argued that Boral should from the recent sale of its North American buildings products businesses now have surplus capital of ~$3.6 billion – equating to $3.02 per Boral share. The company will determine the appropriate form of returns to shareholders, which may involve further shareholder approvals.

“Boral’s [first] Target’s Statement set out details of Boral’s strategy, including its expectation of unlocking significant value in the near-term from the potential divestment of assets to deliver value for shareholders,” Fagg said in an ASX statement on 22 June.

“Our announcement on 21 June, 2021 regarding the sale of North American building products to Westlake Chemical Corporation demonstrates that we are delivering on this strategy.”

As noted in Boral’s Target’s Statement, dated 10 June, 2021, the Boral Independent Board Committee will look to ensure that it has governance protocols in place that are in the best interests of all shareholders.

The Fourth Supplementary Target’s Statement also noted that any proposal for additional SGH representation on the Board will be considered by the independent directors of Boral on its merits at the appropriate time.

Shares in Boral closed on the ASX at $7.37 on 1 July.

Boral shareholders with questions about the SGH Offer should call the shareholder information line on 1300 513 794 (for callers within Australia) or +61 2 9066 4081 (for callers outside Australia) from 9:00am to 6:00pm (Sydney time) Monday to Friday.

The Fourth Supplementary Target’s Statement is available to view on the Boral website.

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