Billionaire Kerry Stokes’ Seven Group Holdings has launched an $8 billion takeover offer for Boral – but doesn’t want the offer to fully succeed.
“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 a statement to the ASX at 7.23pm on Monday revealing the offer
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%.
The lack of interest in a full bid succeeding can be seen by the price the bid is pitched at – $6.50 cash for each Boral share – an offer that matched Monday’s closing price for the shares.
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 Group Holdings managing director and Boral director Ryan Stokes will step off the Boral board during the offer process.
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%.
