As expected, Boral shares fell sharply yesterday after trading resumed in the wake of the issue to institutional shareholders, but the company received good news from two leading ratings groups.
The shares fell from the $4.89 close last Monday after the issue was made at $4.10 a share, a 16% discount.
The shares ended the day at $4.40, down 49c or 10%.
Boral said the offer to institutions will raise gross proceeds of approximately $274 million and the company "received strong support from existing institutional shareholders, with approximately 92% of eligible institutional shareholders electing to take up their entitlements".
"The institutional bookbuild was very well supported, attracting bids from both new and existing Australian and international investors. The clearing price under the institutional bookbuild was $4.65 per new share, a premium of $0.55 to the offer price of $4.10 per new share.
"Therefore, institutional shareholders who elected not to take up their entitlements and ineligible institutional shareholders will receive $0.55 for each new share not taken up (less any applicable withholding tax).
"Retail shareholders who do not take up their entitlements or who are ineligible to participate in the Retail Entitlement Offer will receive any premium between the clearing price under the retail bookbuild and the offer price for new shares of $4.10 (less any applicable withholding tax)," the company said.
Boral also said that Moody’s and Standard & Poor’s said that the company’s ratings will improve.
S&P said the short term rating would be raised from A3 to A2 and the long term rating was reaffirmed at BBB, with the outlook moved to stable from negative, if the issue happened. Moody’s said that if the issue was completed successfully then its outlook would be moved to stable from negative.
The retail component of the offer starts on July 15, and closing on July 30.
CSR shareholders were told yesterday they will get some of the $1.7 billion from the sale of its sugar business, but they were told to wait until the deal was done with Singapore agribusiness giant, Wilmar International.
CSR chairman, Ian Blackburne, says the company is likely to pay shareholders some of the proceeds from the $1.75 billion sale of its sugar business.
However, he reminded shareholders the sale to Singapore-based agribusiness Wilmar International had not yet been completed.
"The board has not considered it yet," he told shareholders at Sydney-based CSR’s annual general meeting. "It is totally appropriate that we give capital back to shareholders and the rest should remain so CSR returns to a strong balance sheet."
Dr Blackburne said the sale still had to be approved by the Foreign Investment Review Board, so shareholders needed to hold off spending the money.
He also said the company was expecting its Viridian glass business, for which CSR paid $690 million in 2007, to post a profit in fiscal 2011.
"We are projecting a profit from Viridian," he said.
CSR raised a significant amount of money from shareholders to fund the takeover of Viridian, which had posted losses since then and the value has been written down substantially.
Those losses and red ink from elsewhere in the company saw the Australian shareholders Association call on Dr Blackburne to step down in a statement issued Wednesday night. That comment got little play at yesterday’s AGM.
In a separate speech
, CEO, Jeremy Sutcliffe, was bullish on the meaning of the sale and the incoming cash to the company.
"It means that CSR will now become a very focused and strongly capitalised Building Products company throughout Australia and New Zealand, with a strategic investment in aluminium."
And while the company intends to get more focused, as we pointed out yesterday, the industry’s outlook is becoming clouded, a point supported by Mr Sutcliffe.
He said the sustainability of longer term housing starts remains unclear while commercial construction remains weak.
And the recent moderation in leading indicators, such as finance and housing approvals, meant the sustainability of any increase in commencements was unclear.
"Commercial construction activity continues to be weak," Mr Sutcliffe told shareholders and CSR was maintaining its estimate of 146,000 housing commencements for the year ending March 31, 2011.
And on the company’s outlook overall, Mr Sutcliffe said it was difficult to predict full-year earnings with accuracy.
"Commodity prices, including aluminium, continue to fluctuate, which CSR attempts to mitigate through hedging of the physical commodity and currency where commercially practicable," he said.
Mr Sutcliffe said the Aluminium division’s performance would depend on the Australian dollar spot price of the metal for the remainder of the year.
"While CSR remains subject to the knock on effects of the global economy, we are confident of optimising our assets as best as we can," he said.
CSR shares rose in early trading to $1.755, up 3.5c, they then slipped back 4c to $1.715, to e
