Investors brace for Australia’s Boral court fight

Investors brace for Australia’s Boral court fight
Published: 01 June 2004

Australian building products group Boral Ltd has only a slim chance of buying cement maker Adelaide Brighton after the nation’s anti-monopolies body vowed to get the federal court to block the move, analysts said on Monday. Investors apparently agreed - reports the Sydney morning Herald.

Adelaide Brighton’s market capitalisation, the total of all its issued shares, ended on Monday at about A$710 million, 18 percent below Boral’s A$867 million ($615 million) bid as investor confidence in the takeover dwindled.

Adelaide Brighton’s share price fell as much as 3.0 percent on Monday to A$1.30, below Boral’s A$1.60 bid price. It was the day’s most active stock as nearly 34 million shares changed hands.

Australian Competition and Consumer Commission Chairman Graeme Samuel said on Sunday he would ask the federal court to block Boral from trying to buy Adelaide Brighton on the grounds that it would substantially lower cement industry competition.

"The market is concerned about the bid going ahead in view of the ACCC rejecting it," said Rohan Walsh, head of Australian equities at fund manager INVESCO Australia.

A winning bid for Adelaide Brighton would more than double Boral’s share of Australia’s cement market to 60 percent from 25 per cent.

Earlier this month, Boral, which owns 27.7 percent of Adelaide Brighton,
agreed not to proceed with the deal after initial opposition from the
competition regulator. But on Friday, Boral said it would go ahead with the plan.

Besides the ACCC legal action, Boral also faces opposition to its bid from privately owned local building products company Barro, which raised its stake in Adelaide Brighton to 19.9 percent on Thursday.

Rohan Gallagher, construction materials analyst at Credit Suisse First Boston, said Barro was not likely a serious contender for Adelaide Brighton. "In our view, the more likely scenario if Boral does actually receive a favourable federal court hearing is Barro accepts Boral’s A$1.60 offer and
uses the sale proceeds to acquire Independent Cement & Lime and any other assets undertaken by Boral for divestment," Gallagher said in a report. (US$1=A$1.41).