The Boral Ltd (ASX: BLD) share price is in focus after rejecting the Seven Group Holdings Ltd (ASX: SVW) bid.
Boral is one of the largest building product businesses in Australia, while Seven is invested in several media and construction businesses.
Takeover offer rejected
Boral, currently worth $6.8 billion, has rejected the latest approach from Seven Group, which has a market capitalisation of around $15 billion.
Boral set up a bid response committee (BRC) within its board of directors to respond to the approach.
The BRC has recommended that shareholders reject the Seven offer by taking no action. Each Boral director on the BRC intends to reject the Seven Group with their own Boral shares. The reason for the rejection was that it “does not represent appropriate value for minority shareholders.”
According to Boral, 11.66 million Boral shares have been accepted in the Seven Group offer since it opened on 4 March 2024, representing 1.06% of Boral’s total share capital.
As a reminder, on 4 March 2024, Seven said it had improved the payment terms under the offer. It was offering 0.1116 Seven Group shares and $1.50 cash for each Boral share that it doesn’t already own.
Independent expert
The independent expert that Boral hired has concluded the Seven Group offer is “not fair and reasonable”.
This expert (from Grant Samuel) suggested the fair value for Boral is in the range of $6.50 per share to $7.13 per share, while the assessed Seven Group offer is between $5.96 to $6.19 per Boral share (and up to $6.39 including the conditional payments). The current Boral share price is $6.20.
Boral also announced today it has surplus property which Grant Samuel assigned a value of $1.4 billion to $1.6 billion, which is equivalent to between $1.26 per share to $1.44 per share. The board expects this will deliver “significant value” to Boral shareholders in the future.
Outlook for the Boral share price
Boral said it’s “ahead of schedule” in delivering its ‘good to great’ turnaround strategy and is only part way through the journey.
Since the introduction of that plan, Boral has seen “substantial earnings growth” with underlying EBIT (EBIT explained) more than doubling from $95.3 million in the first half of FY23 to $201 million in the first half of FY24. It’s aiming for “sustainable double-digit returns and EBIT margins”.
Free cashflow generation has increased from $23.5 million in HY23 to $259.6 million in HY24.
Boral seems to have a good future, and I can understand why the directors want the best price possible for shareholders.
I’m not sure if it’s a buy today, considering it’s close to the offer price. But, long-term shareholders have done well out of the situation, whatever happens next.
