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.
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.
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.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
- Elixinol (ASX:EXL) share price tumbles on capital raising update – December 4, 2020 2:54pm
- Are ASX stocks about to get an earnings upgrade boost in the new year? – December 4, 2020 2:11pm
- Goldman says buy the Metcash (ASX:MTS) share price ahead of next week’s results – December 4, 2020 12:13pm