The Board of takeover target Boral has knocked back an increased bid from billionaire Kerry Stokes’ Seven Group, telling shareholders they should reject the offer as it continues to undervalue the group's value.
On Friday, Seven Group announced that it would increase its offer to Boral’s shareholders from $6.50 per share to $7.30 on the condition it will be able to increase its stake in the building products company from 23.9 per cent to 29.5%. The offer would increase further to $7.40 per share if it can achieve a 34.5% stake in Boral by July 7. The $7.40 per share offer values Boral at $9.1 billion, a hefty increase on the previous $8 billion valuation based on the $6.50 offer made in May.
However, following an independent review, Boral’s management has stood firm in its recommendation. “The Boral independent board committee continues to unanimously recommend that you reject the Seven Group offer and the revised offer, as both still undervalue your Boral shares,” it said.
Boral has engaged independent expert Grant Samuel, who estimated the value of Boral’s entire business at between $9.7 billion and $10.8 billion, equating to a share price of between $8.25 and $9.13.
Boral shares jumped on the news of the revised offer, climbing 6.4% to close at $7.34 on Friday.
Various media reports have confirmed Seven Group has been gradually building its stake in Boral via incremental creep provisions over the past year, with corporate rules declaring the company can no longer buy stock without launching a takeover bid.
Earlier in the week, Boral announced that it has entered into an agreement with a subsidiary of Westlake Chemical Corporation, to sell its North American Building Products business for US$2.15 billion. The Board confirmed it will assess options to distribute surplus capital having regard to the size of the surplus and the most appropriate method for distribution to shareholders.