Boral Limited (ASX: BLD) has issued a 104-page target's statement urging its shareholders to once more reject the takeover offer from Seven Group Holdings Ltd (ASX: SVW). At the time of writing, the Boral share price is trading at $6.79 – 1.31% less than yesterday's closing price.
In today's ASX release, Boral reiterated its message that Seven Group's takeover offer undervalues its business. Particularly, considering Boral's measures to grow the company's value and streamline operations.
The statement included an independent expert's assessment of Boral's value and a statement from the company's chair.
Let's take a closer look.
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Quick refresher
On 10 May, Seven Group announced its bid to acquire all Boral shares it didn't already own for $6.50 apiece. The following day, Boral recommended its shareholders reject the bid.
The $6.50 price point represented a nil-premium on Boral shares' previous closing price and valued the company at around $8 billion.
At the time, The Motley Fool reported the takeover offer was most likely made to evade 'creep rules'. Creep rules mean the group couldn't increase its 23.3% holding in Boral without making a takeover offer.
Today's news from Boral
According to today's release from Boral, an independent expert has stated that Seven Group's offer undervalues Boral by as much as 40.5%.
The company stated the expert found the estimated fair market value of Boral is between $8.25 and $9.13 per share, following Boral's renewed strategy,
This renewed strategy, announced within Boral's half-year results, includes a target to increase the company's earnings before interest and tax (EBIT) by $300 million.
As part of the strategy, Boral said it will begin a new operating model in Australia to create a "more nimble and more responsive" company.
Additionally, Boral is making changes to its businesses in North America. These include:
- The sale of its Meridian Brick business announced in December 2020.
- The sale of its share in the USG Boral joint venture, completed in late March.
- Potential changes to the management of its North American fly ash business.
- Potentially divesting from its North American Building Products business.
Boral also stated it has 276 property assets in Australia which are worth $710 million. It's currently looking into using the properties to increase its profits.
Boral believes Seven Group is taking advantage
The company stated Seven Group wants greater influence over Boral "without paying fairly for it".
According to Boral, Seven Group's takeover offer is opportunistic and takes advantage of Boral's current situation.
Australian construction demand was badly impacted by COVID-19 – the industry saw a 7% decline in spending – but, according to Boral, it's expected to recover shortly.
The company stated a strong recovery is expected over the next 5 years, with construction spend set to increase by 4% annually.
Commentary from management
Boral chair Kathryn Fagg issued a powerful statement within the release. She said:
The Boral Independent Board Committee has carefully considered the SGH Offer to assess whether it is in the best interests of Boral Shareholders and believes that the SGH Offer materially undervalues your Boral Shares…
The SGH Offer of $6.50 per Boral Share is neither fair nor reasonable and is below the Independent Expert's estimated fair market value of $8.25 to $9.13 per Boral Share
Boral share price snapshot
Despite plenty of drama, 2021 has been a good year so far on the ASX for Boral shares.
Currently, the Boral share price is 37% higher than it was at the beginning of the year. It has also gained 80% since this time last year.
The company has a market capitalisation of around $8.2 billion, with approximately 1.2 billion shares outstanding.
