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UPDATE 2-Australia's Boral asks shareholders to reject Seven Group's zero premium bid

Published 11/05/2021, 10:29 am
Updated 11/05/2021, 08:24 pm
© Reuters.
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(Adds analyst comment, context)

By Soumyajit Saha

May 11 (Reuters) - Australia's Boral Ltd BLD.AX on Tuesday urged its shareholders to reject a takeover offer from diversified investor Seven Group Holdings SVW.AX , saying that the offer of buying Boral shares at no premium was "opportunistic" and undervalued the company.

Seven, whose interests range from industrial services to media companies, on Monday offered to buy all the shares it does not already own in Boral for A$6.50 per share. offer by billionaire Kerry Stokes' Seven Group came on the heels of a stellar 36% rally in Boral shares this year, underpinned by a hot property market and after Seven failed to increase its stake in the construction materials maker to 30%.

The decision to make a bid without a premium signalled the absence of the threat of a competing offer for Boral, a company in which Seven already has enough voting power to squash other offers, analysts said.

"No one else is coming to play and the stock isn't cheap anymore, so all things put together they (Seven) are just playing the long game," said Mathan Somasundaram, chief executive officer at Deep Data Analytics.

Currently with a 23.18% stake in the company, Seven was forbidden by regulations called "creep provisions" that disallowed it from scooping up more Boral shares in the open market till October.

The bid for greater ownership is likely due to a desire to exercise more control over Boral's board, analysts added.

"In the scenario whereby Seven reaches its 'target' 30% stake, the company would likely seek another seat on Boral's Board," Citi analyst Lisa Huynh said in a note.

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Boral's stock is trading at more than 29 times its earnings, compared to the broader market's .AXJO valuation of about 21 times its earnings.

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