Growing speculation on corporate action could move the dial on the Boral Limited (ASX: BLD) share price this morning.
Kerry Stokes and entities related to the high-profile businessman upped their stake in the embattled building materials supplier to 19.984% from 16.31%.
That puts the group just below the 20% threshold that would force Stokes to lob a takeover bid for Boral.
M&A could help the Boral share price close the gap
While I would never encourage investors to buy a stock on takeover potential alone, the interest Stokes is giving Boral is welcomed news for shareholders.
It could continue to drive the Boral share price recovery as the gap between the stock and its peers is closing.
But the stock is still down around 17% over the past year when the CSR Limited (ASX: CSR) share price is down 7% and the James Hardie Industries plc (ASX: JHX) share price is up 30%.
In contrast, the S&P/ASX 200 Index (Index:^AXJO) shed around 11% of its value over the same period.
Value in the eye of the substantial beholder
Boral has been under the M&A spotlight for a while as Stokes moves up its register. The latest purchase of 45 million shares could indicate to some investors that the stock is still looking cheap.
Boral underperformed due to its poorly executed US expansion under its former chief executive Mike King.
It's new chief Zlatko Todorcevski is truly thrown into the deep end as he not only needs to come up with a credible recovery plan but also fight off what may be a hostile substantial shareholder.
Boral's new boss between a rock and hard place
It's speculated that Stokes only wants Boral's Australian assets for his other listed entity Seven Group Holdings Ltd (ASX: SVW).
But these are the assets that Todorcevski may be counting on keeping to help him turn Boral's fortunes around. After all, it's the underperforming US windows and fly ash business that triggered much of the shareholder value destruction over the last two years.
It won't help Todorcevski's legacy much if all he's seen as is an auctioneer that's come in to flog Boral's assets to the highest bidder.
Double-edged sword
At the same time, he knows he will need to find ways to accommodate Stokes, who's not only bought a seat at Boral's table, but is sitting right beside Todorcevski.
While Boral's shareholders may celebrate the fact that M&A interests is providing a safety net as Boral walks a tightrope to recovery, make no mistake that Stokes is there to maximise value to Seven Group – not Boral.
Let's hope Stokes turns out to be a friendly predator, even though I've yet to meet one.
