Seven and Boral shares fall on takeover valuation error
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More news: Seven Group shares dipped in morning trading after it criticised "fundamental errors" in an independent review that recommended Boral shareholders to reject Seven's buyout bid.
Kerry Stokes' Seven shares were 2.5% lower to $40.26 by 11:25am AEDT while Boral shares fell 1.1% to $6.08.
Seven 'extremely disappointed' in Boral valuation error
The news: Seven Group said it is "extremely disappointed" that there were "fundamental errors" in an independent review that recommended Boral shareholders reject Seven's buyout bid earlier this month.
The numbers: Seven, which currently holds around 72.6% controlling interest in the construction materials supplier, had offered to acquire all the remaining shares at a maximum of 0.1116 Seven shares and $1.70 cash, valuing the company at $6.19 a share.
The Boral board rejected the bid after independent expert Grant Samuel estimated the fair market value higher, in the range of $6.50 to $7.13 per share. It also valued Boral’s surplus property assets between $1.4 billion and $1.6 billion, which the company said represents an uplift of $0.36 to $0.54 in value per share.
Boral's share price closed on Monday at $6.19.
The context: Kerry Stokes’ Seven noted "fundamental errors" in Grant Samuel's report, and Boral's resulting target statement was "unbalanced, selective and risks fundamentally misleading Boral minority shareholders".
Seven said Grant Samuel used inappropriate projection scenarios in its assessment, failed to consider critical cost of capital inputs, failed to appropriately consider relevant multiples as part of its valuation, incorporated errors in its property valuation, and did not include the impact of windfall gains tax and capital gains tax in its property revaluation.
Seven concluded that "Grant Samuel should have at least found the offer to be 'reasonable' and Boral's bid response committee should have recommended that Boral shareholders accept the offer".
Seven went on to urge Boral shareholders to accept the takeover offer, flagging that rejecting the bid may reduce Boral's trading liquidity, index-weighting and share price, and make the likelihood of future dividends "unlikely".
The source: ASX announcement
