Boral has urged its shareholders to reject the Offer by Seven Group Holdings to acquire shares in the construction materials supplier, which appears to be an attempt to acquire a minimum 30 per cent stake in Boral.
Seven Group Holdings (SGH) offered $6.50 per Boral share – the closing value for Boral on Monday, 10 May – to which Boral said the Offer undermined the value of the company.
“This committee (of the Board) believes the offer is opportunistic, undervalues the company and unanimously recommends that shareholders reject the Offer once it opens by taking no action,” Boral said in a statement issued to the Australian Stock Exchange.
“Boral management remain committed to the company’s strategic goals including the transformation targets set across the group and the ongoing process in relation to its North American portfolio.”
SGH, which has significant interests in mining and energy, including holdings in Caterpillar distributor WesTrac and Coates Hire, currently has a 23.2 per cent stake in Boral Limited.
According to its bidder’s statement, SGH is not entitled to acquire further shares in Boral due to Corporations Act restrictions that prevent “creeping”, hence the bid for up to 100 per cent ownership in the company. In a statement reported by the mainstream media, SGH explained that in making the Offer, it is “seeking to increase its interest in Boral and would be satisfied for the Offer to result in it holding a total interest of around 30 per cent of Boral”.
SGH’s managing director Ryan Stokes is a Boral director. He has recused himself from the Boral Board of Directors while the Offer is live.
In regard to SGH’s Offer, Boral is now required to prepare a Target’s Statement that will provide shareholders all of the information they will need to make an informed decision. It is believed the earliest the Offer will be open to Boral shareholders is Tuesday, 25 May, 2021.
Company resilience
Boral has undergone an extensive review of its strategy and global operations in the past 12 months. The company decided to sell its 50 per cent stake in USG Boral in April 2020, while simultaneously exploring third party opportunities for its building products businesses in North America and dealing with dwindling supply in its North American fly ash business.
In April 2021, Boral completed the sale of USG Boral to German multinational Gebr Knauf KG (Knauf) for $USD1.015 billion ($AUD1.33 billion) and announced its intention to undertake an on-market share buy-back of up to 10 per cent of the shares on issue.
In more recent times, the company has benefitted from a booming Australian housing market, as the Federal Government pumps $110 billion into its 10-year infrastructure pipeline.
In mid-April 2021, Boral’s chief executive officer and managing director Zlatko Todorcevski – who was brought on in July 2020 to lead Boral and review the viability of Boral’s portfolio of operations – said the company was now exploring options for its North American fly ash business.
“New opportunities for supply exist from harvesting landfills, imports and natural pozzolans, which we expect will more than offset the decline in fresh fly ash supply as the US transitions away from coal fired power generation,” he said.
“As we continue to build our alternative supply strategy, strategic alliances and opportunities for partnership will be considered in parallel with divestment options or continued ownership.”
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