Boral has extended for the second time its A$1 billion-plus takeover offer for cement maker Adelaide Brighton until May 7. The move was not unexpected, as the company awaits regulatory approval from the Australian Competition and Consumer Commission, which is still investigating the merger. The ACCC has asked for additional information from the two parties and will not be ready to make a decision for some time. Citigroup Smith Barney said in a report that while the timing of ACCC’s approval "remains difficult to assess", the formation of Cement Australia took three months to gain approval. "Silence by the ACCC to date on the proposed acquisition looks to have been taken negatively by the market," the report said. "However, we do highlight that it took the ACCC three months to rule on the formation of Cement Australia, and in this light the delays thus far have not been well beyond expectations. "As far as we understand it, the main area of concern has been the Victorian cement market.
"Our analysis suggests that the sale of AdBri’s 50 per cent interest in Independent Cement & Lime should be sufficient to appease any competition concerns and Boral have already agreed to these undertakings to proceed with the transaction." If the merger is approved, it is understood AdBri will sell its 50 per cent stake in ICL to joint venture partner David Barro. Boral has also indicated that it would dispose of its concrete masonry assets in NSW, Victoria and South Australia.
Boral first launched its takeover for AdBri on December 15 last year when it offered $1.55 a share. The offer price has since been increased by 5c to $1.60, on condition that Boral obtains the support of 90 per cent of AdBri’s shareholders. AdBri’s independent directors have unanimously recommended that shareholders accept Boral’s increased offer.
Only key stakeholder David Barro, who has a 10.1 per cent interest in AdBri, has not indicated whether he would use his holding to block Boral’s bid. Boral now holds a 42.6 per cent interest in AdBri which includes a 19.9 per cent holding and acceptances for 22.7 per cent of the company from shareholders. Smith Barney said that if the takeover was successful, Boral should be able to extract between A$25 million and A$30 million in cost savings and would enhance its earnings per share by 10.7 per cent in 2005 and by 12.2 per cent in 2006.
