Boral has told shareholders to reject the $6.50 a share cash, $8 billion offer from major shareholder Seven Group Holdings, which is controlled by Perth-based billionaire, Kerry Stokes.
Seven Group sprang its nil premium offer at 7.23pm on Monday, well after the market close and made it clear in the documentation that it was merely trying to boost its holding in Boral from 23.18% to 30%.
The $6.50 a share price was Boral’s closing price on Monday (hence the lateness of the bid) and Seven group made a pathetic attempt to spin the price as being at a premium to when the Boral share price was back in April and March when Seven made a couple of buying moves.
Boral said it has formed a committee of its directors, excluding Mr Ryan Stokes, to consider the Offer. (He has recused himself from the matter and stepped down from the Boral board for the time being).
“This committee believes the Offer is opportunistic, undervalues the Company and unanimously recommends that shareholders reject the Offer once it opens by taking no action.”
“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.
“Shareholders are not required to take any action in relation to the Offer and Boral will provide further details in relation to the Offer in a Target’s Statement and further communications to be provided to shareholders in the coming weeks.
“The Target’s Statement will include an Independent Expert’s Report as required by the Corporations Act,” Boral said in its statement on Tuesday.
In its statement on Monday night, Seven Group explained the rationale for the bid.
“In making the offer, Seven Group Holding 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,” Seven explained in the statement.
Seven already has effective control of the country’s biggest building supplies company with a stake 23.18%. That’s the largest holding in Boral.
It has been lifting its stake gradually by buying 3% of the shares every six months and building on its initial stake that started at 19.9%.
But it is obviously in a hurry to get to 30%.
Seven said half-heartedly argued the offer represented a premium of 54 cents to the average purchase price of shares it acquired on April 8 as part of its creep provision, and 18% to the last closing price of Boral shares on March 31, which was the trading day prior to the announcement of Boral’s current on-market share buyback.
Seven explained that under Australian takeover laws it could not acquire more shares without launching a full off-market takeover offer.
Under Australian law a shareholder must launch a takeover off once it acquires more than 19.9% of a company.
The one exception to that rule is the “creep” provision which allows a shareholder to grow their shareholding by 3% every six months which is what Seven Group Holdings has been doing.
If it gets the 6% plus it wants, it will be at a cost of just over $500 million.
Seven Group is in the process of wrapping up the retail side of its recent $500 million capital raising.
So the ‘muted’ takeover will not cost it any new debt – just the costs associated with an offer.
Seven Group said it had no interest in selling its current Boral stake, thereby making it clear that any counter offers would not succeed.
The major question is whether Seven Group will accept a rush of shares that takes its holding above 30%.
Boral will have the costs of the defence and independent experts report to pay for – an extra cost Seven Group has failed to explain the need for.
And despite the clear intentions not to sell and that it wants a full bid to fall short, the punters and urgers in the market bid the Boral share price higher to where it closed up 2.6% at $6.67.
That indicates the market idiots think there will be more money from Seven Group and the Stokes or that there will be a counter bid – hard to see with the biggest shareholder with more than 23% says, ‘won’t sell’ so any counter bidder will have to pay more and will be left with a 77% stake at best and unable to consolidate Boral to take full advantage of cash flows and revenues and cost synergies.
