Seven Group Holdings returns fire over Grant Samuel’s ‘fundamental errors’ in review of $2b offer for Boral

Seven Group Holdings has returned fire over an independent expert’s report that urged minority Boral investors to reject a $2 billion cash-and-scrip bid aimed at mopping up remaining shares in the building products supplier.

The board of Boral last week said a report that evaluated the proposal by SGH — which already controls 72 per cent of the register — said the offer was worth between $5.96 and $6.39 a share.

But authors Grant Samuel valued the shares at between $6.50 and $7.13 and concluded SGH’s offer was not fair or reasonable.

Boral also argued the company’s turnaround strategy was ahead of schedule and only part way through.

SGH hit back on Tuesday in a updated bidder’s statement at what it labelled “fundamental errors” under a number of scenarios considered in Grant Samuel’s assessment, which it said inflated the supposed value range for Boral’s stock.

The suitor focused its wrath on “unrealistic price and margin increases for which there were no reasonable grounds” under certain circumstances, cost of capital inputs, capital gains taxes and lease termination costs. It also noted the assessment included a price premium for full control, which SGH said it had already gained in July 2021.

“As a consequence, the target’s statement is unbalanced, selective and risks fundamentally misleading Boral minority shareholders,” SGH said.

“SGH encourages the shareholders of Boral to act now and accept the offer.”

The ASX-listed manufacturer delivered 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.

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

“We encourage shareholders to remain with Boral and fully participate in the future value available through continued direct ownership of Boral,” the board said.

Boral chairman Ryan Stokes, who is also chief executive of SGH, last week argued the bid was a fair value for minority shareholders “on any metric”.

“Not only it is at a higher earnings multiple than recent and comparable transactions in the sector, our potential maximum consideration represents almost 31 times Boral’s December 2023 price to earnings multiple,” Mr Stokes said.

He argued Boral shareholders could maintain exposure to future growth in its assets within SGH — which has businesses including WesTrac and Coates Hire.

“We will continue to take this offer forward to shareholders directly, and make sure that retail shareholders — who represent half the free float— understand that non-acceptance runs the risk of stranding them in an illiquid position with no dividends,” he said.

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

SGH has a major stake in Seven West Media, publisher of The West Australian.