Seven’s bid to buy the rest of Boral comes with several sweeteners, but one big stick that could leave Boral investors in a tough spot.
Already a subscriber?Ryan Stokes has apparently seen enough. Just weeks after building materials giant Boral delivered a powerhouse result, capped off with a
The broader Seven pitch is that Boral is fully valued, trading on a price-to-earnings multiple of 24.4 times, well above the 20.1 times that the ASX 200 trades on. Boral shareholders can switch out of a fully valued, very illiquid stock that isn’t pay dividends and switch into Seven Group, which pays fully franked dividend, has strong momentum acrossand Coates divisions, and trades on 16.7 times, suggesting plenty of room for a re-rating to something in line with the broader market.
But the view inside the Seven camp is that those risks have dissipated as Boral’s turnaround has gained momentum. Boral produced EBIT of $232 million in its 2023 results announced last August; guidance for the year ending June 30 is for EBIT between $330 million and $350 million. The Stokes family doesn’t like issuing equity, but is firmly of the belief that its track record shows its ability to boost value over time, having raised $385 million in 2017 at $11.20, and $533 million to help pay for Boral at $22.50 in early 2021. Seven’s shares dipped 2 per cent on Monday to $39.91, but have surged more than 40 per cent in about 14 weeks since the start of November.