Billionaire Stokes family wins support for takeover of Australia’s largest concrete maker

Boral’s independent directors have caved in to Seven Group’s hardball takeover bid for control of Australia’s largest concrete and cement maker, but not before wringing a handful of concessions from the billionaire Stokes family controlled company.

The about-face in the combative takeover follows Seven beefing up its already dominant Boral holding to 78.8 per cent and the independent directors recognising Seven was serious in its threat to stack Boral’s board with new directors, delist the company from the ASX and defer dividend payments.

Seven Group chief executive Ryan Stokes is also the chairman of Boral.

Ryan Stokes, Seven’s chief executive, along with father Kerry owns about 57 per cent of Seven, a diversified Perth-based conglomerate. The billionaires also control industrial equipment firm Westrac, Coates Hire, a large chunk of ASX-listed oil and natural gas producer Beach Energy and a dominant interest in Seven West Media.

Boral, run by Vik Bansal, is midway through a major turnaround and is bullish about the prospects of its quarries, cement and concrete as multiple major infrastructure works get under way around the country and demand for housing remains sky-high.

The company is the country’s biggest building materials maker, supplying Australia’s largest building and infrastructure firms with highway and home building materials.

Boral’s bid response committee said in a supplementary target statement to investors on Friday that Seven’s large interest in the company would result in its nominees having “effective control of decision-making on the Boral board and would reduce the influence of independent voices”.

“The bid response committee has concerns about the impact of these changes on Boral as a standalone listed company for minority Boral shareholders in the near term,” it said.

The committee said it was able to “negotiate a package of measures with Seven to enhance the value received by Boral shareholders who accept the Seven offer,” and hence had changed it position, recommending shareholders now accept Seven’s offer or sell their shares on-market.

Seven lobbed its takeover bid in February. At that stage, it owned 71.6 per cent of Boral and was offering to buy the remaining 28.4 per cent at an initial offer of 0.1116 of Seven Group shares and $1.50 cash for every Boral share.

Boral’s independent directors were quick to reject the $6.05 cash and scrip offer (it could go as high as $6.25 depending on certain conditions) the following month after their independent expert, advisory firm Grant Samuel, labelled it “not fair and not reasonable.”

At the time, Seven chief Ryan Stokes said, “we obviously disagree with their assessment strongly,” reiterating the offer was “best and final” and would not be increased.

Boral’s directors have since extracted some worthy concessions from Seven.

They include: increasing the offer’s cash component from $1.50 a share to $1.70 without the conditions Seven had previously attached; paying Boral’s investors a 26¢ dividend in April; an on-market buyback of shares up to the value of $6.42; Seven paying a fully franked 30¢ dividend; and rounding up, rather than down, shareholders’ final cash consideration.

The April dividend, to be deducted from the final cash payment, and Seven’s 30¢ payout will allow investors to aggregate and claim significant franking credit benefits.

As well, the buyback increases liquidity for shareholders who want to sell on the market, Boral said.

Grant Samuel’s original assessment settled on a fair value for Boral between $6.50 to $7.13 a share, but they have reviewed their position and now believe Seven’s offer is reasonable.

The total value for shareholders under the deal negotiated by Boral’s independent directors will be between $6.16 to $6.39 per share, plus around 13¢ in franking credits for Boral shareholders, the statement said.

Boral’s shares rose 1.82 per cent in morning trade to $6.14.

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