Seven Group Holdings’ dividend windfall finally wins over Boral’s board in months-long takeover tussle

Boral has given in to market pressure and agreed to a rejigged takeover offer from Seven Group Holdings that will see shareholders showered in dividends.

The capitulation ends a months-long chase by the diversified media, resources and industrials company to sweep up the rest of Boral’s register it did not already own after it secured a more than 70 per cent stake in 2021.

Boral on Friday said developments over recent weeks had forced it to reconsider SGH’s offer, which was first lobbed in February and reached fever-pitch late last month when the suitor cried foul over “fundamental errors” in an independent expert’s report from Grant Samuels that concluded the $2 billion offer was not fair or reasonable.

A re-evaluation saw Grant Samuel later trim its fair valuation range by 8¢. It now says the offer is reasonable.

Key among the considerations for Boral was SGH’s proposed changes to Boral’s board and its tightened grip on the company, which had grown from 71.6 per cent since the initial approach to now stand at 78.9 per cent.

“With the likelihood that this will increase further before the end of the offer period, there is a risk for minority shareholders that liquidity in trading of Boral shares will reduce, perhaps materially, which may adversely affect their ability to dispose of their Boral shares in the future,” the company board’s bid response committee said.

Boral said shareholders would benefit from an increase in SGH’s cash component of the offer, up from a minimum $1.50 a share to $1.70 a share.

Under the previous terms of the offer, that would have only increased from $1.50 a share to $1.60 a share if SGH secured an interest of 80 per cent or if Boral unanimously recommended the deal to shareholders. It would have increased to $1.70 a share only if SGH controlled 90.6 per cent of Boral’s stock.

Boral shareholders who have already accepted the offer and received their consideration are still entitled to receive the increased payout.

Shareholders will also reap the rewards of a dividend component from both companies.

Boral will hand over a fully franked dividend of 26¢ later this month and SGH will declare 30¢ fully franked payout that will be sent to all existing and new SGH shareholders on completion of the deal.

The total value for Boral shareholders under the terms of the improved deal now stands at between $6.16 and $6.39 a share, plus about 13¢ a share in franking credits for Boral shareholders who are able to obtain the benefit of the franking credits.

SGH managing director Ryan Stokes welcomed the change of tune from Boral.

“We are pleased to be able to offer Boral shareholders the maximum consideration under our offer,” Mr Stokes said.

“Both new and existing SGH shareholders also stand to benefit from the 30¢-a-share fully-franked dividend that SGH will pay following completion of SGH’s offer.

“The initiatives announced today improve momentum supporting our achievement of this outcome.

“Boral shareholders will continue to have exposure to the future growth of the Boral’s business within SGH, alongside the group’s suite of market-leading, industrial-focused businesses. SGH has a history of delivering outstanding shareholder returns incorporating capital growth and dividends, with a total shareholder return of 180 per cent over the past five years.”

The offer deadline has now been extended until May 15.

Boral shares have surged 63 per cent in the past year amid a turnaround strategy under chief executive Vik Bansal.

In the six months to December, the company delivered a $122 million profit. That was up about 36 per cent on the prior year and came as revenue rose 9 per cent to $1.8b.

Those half-yearly results also saw the company deliver a double-digit growth in earnings margin for the first time in many years.

Its shares were up almost 2 per cent to $6.14 at 9.15am.