This embattled ASX 200 company could be the next M&A target

The Boral Limited (ASX: BLD) share price surged for the second day on rumours that it may be a takeover …

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Boral Limited (ASX: BLD) share price surged for the second day on rumours that it may be a takeover target.

Shares in the building materials group jumped 6.6% to $3.54 on Tuesday – making it the third best performer on the S&P/ASX 200 Index (Index:^AXJO) after the Perenti Global Ltd (ASX: PRN) and Domain Holdings Australia Ltd (ASX: DHG) share price.

Aussie Broadband share price takeover M&A takeover

Corporate interest in Boral

The big jump in Boral, which puts its two-day gain to nearly 14%, puzzled many before rumours were published in the Australian Financial Review pointing to a large buyer.

It's speculated that Kerry Stokes' Seven Group Holdings Ltd (ASX: SVW) has been a keen buyer of the stock on Friday when 150 million Boral shares changed hands. That's equivalent to 12% of Boral.

We should know soon if Seven Group is behind the frenzy as it will need to lodge a substantial holder's notice with the ASX this week – assuming the rumours are true.

Why Seven Group might be interested in Boral

Such a move makes strategic sense. First, Seven Group has a track record of buying businesses, such as construction equipment rental company Coats Hire.

Boral will allow the group to expand vertically into the infrastructure construction sector by providing both materials and equipment.

Seven Group is tipped to win work on the Snowy Hydro 2.0 project, the Western Sydney Airport and WestConnex extensions, according to the AFR.

Wounded animal

Boral is underperforming the market after a series of management missteps that culminated in its chief executive Mike King announcing his exit in August.

Not only is its share price in the doldrums, which makes it an opportunistic target, but its effectively leaderless. All the more enticing for any would be acquirer.

But a full takeover isn't a sure thing.

Next move may not be a takeover

Boral's troublesome US business doesn't quite fit into Seven Group's portfolio and Boral is facing a class action lawsuit over an accounting scandal involving the group's US windows business.

Any new owner of Boral would be liable to pay damages if the court rules against the Boral.

So, this means that Seven Group may be buying itself a seat at the table in any carve-up of Boral's assets.

Boral is under pressure to consider a radical restructure that would involve divesting assets.

Foolish takeaway

I have picked Boral as an ideal tax-loss selling candidate a week ago, before the corporate action was revealed.

This doesn't change my dim view of Boral as I don't recommend investors buy shares solely based on takeover hopes.

I rather stick to better quality names in the industry like James Hardie Industries plc (ASX: JHX) and CSR Limited (ASX: CSR).

Further, these stocks are better placed to benefit from the federal government's new housing grants, which are expected to be announced this week.

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with me on Twitter @brenlau.

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.

More on Mergers & Acquisitions

Female miner smiling in front of a mining vehicle.
Gold

Why has the Newcrest share price leapt 7% in under a week?

The Newcrest share price looks to be benefiting from tailwinds blowing in on three fronts.

Read more »

A woman sits miserable behind the wheel of her car.
Mergers & Acquisitions

Why is the Carsales share price sinking 7% today?

Carsales is raising funds to support its big bet on Brazil being a key driver of its future growth.

Read more »

A handsome smiling man sits in the front seat of an electric vehicle with his hands on the wheel feeling pleased that the Carsales share price is going up and the company will shortly pay its biggest dividend ever
Mergers & Acquisitions

Carsales share price on ice amid $500m cap raise and acquisition news

Carsales is betting big on Brazil being a key driver of its future growth.

Read more »

Man drawing illustration of a big fish eating a little fish representing a takeover or acquisition.
Mergers & Acquisitions

ASX 200 stock InvoCare rallies 37% on takeover approach

The InvoCare share price is rising from the dead after receiving a takeover approach.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Mergers & Acquisitions

Mineral Resources share price slides as Norwest takeover bid heats up

Mineral Resources first announced its plans for an off-market takeover bid of Norwest Energy on 16 December.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop
Resources Shares

4 ASX 200 mining shares to buy for takeover potential: expert

Here are more ideas to cash in on a potential merger and acquisitions frenzy in 2023.

Read more »

A man sitting at his dining table looks at his laptop and ponders the CSL balance sheet and the value of CSL shares today
Mergers & Acquisitions

6 asset-rich ASX 200 shares to buy for their takeover potential: expert

These half-dozen stocks have just the attributes that would have private equity licking their lips.

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Mergers & Acquisitions

Origin share price surges 14% despite lower takeover bid

The consortium has dropped its bid for the ASX 200 company to $8.90 per share.

Read more »