Boral rejects Seven Group Holdings’ $3.1b offer as ‘not fair and reasonable’

The board of Boral has turned down the advances of Seven Group Holdings, which had offered a $3.1 billion deal to sweep up the remaining shares it did not already own in the building products supplier.

SGH holds more than 70 per cent of the company and last month tempted investors with $1.50 cash for each share they hold, plus 11.15 Seven Group shares for every 100 Boral shares they own.

The offer will be topped up 10¢ for each share if SGH reached an aggregate interest of 80 per cent or more or the Boral board unanimously recommends that shareholders accept the deal. It would increase by a further 10¢ if SGH hit the 90.6 per cent compulsory acquisition threshold.

But Boral on Tuesday told shareholders to reject the offer after independent experts from Grant Samuel’s concluded the bid was “not fair and reasonable”.

The same expert put a price target on Boral of between $6.50 and $7.13 a share. Grant Samuel’s assessed value of the SGH offer of $5.96 to $6.19 per Boral share — and up to $6.39 including the conditional payments — was below this range.

Boral’s bid response committee said the SGH proposal undervalued the company, which had a “robust” outlook courtesy of a turnaround strategy that was ahead of schedule and only part-way complete.

“The independent expert has concluded that the SGH offer is neither fair nor reasonable, supporting the BRC’s view,” the committee said.

”Boral management is ahead of schedule in delivering on its ‘Good to Great’ improvement strategy and is only part way through this journey.

“In addition, Boral has today announced that it has surplus property to which Grant Samuel has attributed a value of $1.4 billion to $1.6b in its independent expert’s report, equivalent to $1.26-$1.44 per share, which we expect to deliver significant value creation to Boral shareholders in the future.

“We encourage shareholders to remain with Boral and fully participate in the future value available through continueddirect ownership of Boral.”

Boral embarked on a turnaround strategy under chief executive Vik Bansal after selling off assets in North America and completing a return to its core businesses in Australia.

The company in February reported a $122 million profit in the six months to December, up about 36 per cent on the prior year. That came as revenue rose 9 per cent to $1.8b.

It forecast full-year earnings before interest and tax of $330 million to $350m, and Mr Bansal said the company would work to keep an earnings margin in the double digits.

SGH last month said the “best and final” bid move to mop up the remaining 28.4 per cent of Boral was consistent with the diversified industrial services, media and energy group’s owner-operator strategy and would increase SGH’s strategic flexibility and access to Boral’s cash flow.

It said Boral, along with its WesTrac and Coates Hire businesses, had driven a strong first-half financial and operating result, supporting an upgrade of guidance in its pre-interest earnings of “mid to high teen” percentage over the 2024 financial year.

SGH has a majority stake in Seven West Media, publisher of The West Australian and thewest.com.au.