Seven Group shareholder Martin Currie has endorsed the conglomerate’s hefty stake in Boral, saying Seven will boost Boral’s performance and has a strong record of adding value to companies it invests in while delivering effective scrutiny of management.
Reece Birtles, chief investment officer at Martin Currie Australia, said he doubted that Seven would increase its 19.984 per cent stake in the building materials giant, adding that it was a “comfortable position” for both companies and gave Seven representation on Boral’s board.
“Their investment in Boral is a win-win for Seven and Boral shareholders. You’ll get action at Boral, you’ll get improvement from a business that has under-performed for a number of years,” he said.
“It’s a substantial investment exposure for Seven and they’re going to care about getting that business to turn around,” he said.
The comments come on the eve of a much anticipated Boral annual shareholder meeting on Tuesday, where the company is expected to outline changes to its operations including divestments of some assets. Shareholders will also vote on whether they want Ryan Stokes, Seven Group’s chief executive officer and who was recently appointed to Boral’s board, to remain on the board.
You’ll get action at Boral, you’ll get improvement from a business that has under-performed for a number of years.Reece Birtles, chief investment officer at Martin Currie Australia.
Both Mr Stokes and Seven’s Group’s chief financial officer Richard Richards were appointed to Boral’s board last month, but Mr Richards’ nomination was withdrawn in the wake of sharp criticism from two activist shareholders who argued two board seats for Seven representatives was disproportionate and gave Seven “excessive influence”.
Mr Birtles said the Seven pair would have been very effective board members, and that he would have been comfortable with Seven having what would have been two representatives on a nine person board.
“What we would hope is that Seven can really encourage the board and the management to improve the performance of Boral, and hopefully Ryan can achieve that,” he said.
Mr Birtles said Seven had made wise investments in assets related to infrastructure and construction, describing the conglomerate’s WesTrac business as one of the best businesses in Australia without a high profile. WesTrac is the Caterpillar excavation and machinery equipment business which generates substantial revenue from the nation’s mining industry, which uses its trucks and other heavy equipment.
“They’ve also done well at investing in things like Coates (Hire) and in Beach Energy. And when they’ve invested in those sorts of businesses one of the things we’ve really noticed is that they have a strong focus on management execution and making sure the businesses perform well. And they’re not scared to change management and they really hold management accountable,” Mr Birtles said.
Boral has faced substantial challenges over the past couple of years, has issued multiple profit warnings and is facing two shareholder class actions in Australia relating to its North American Windows business.
Whilst a minority shareholder, Martin Currie holds tens of millions of dollars of Seven Group shares. It is not invested in Boral, but has been in the past.
Source: Thanks smh.com