Arguably the the disposal of the US assets and the 'capital' return was an exercise in shareholder wealth destruction. The US assets were high caliber well sought after assets that provided Boral with international geographic diversification as well as business diversification leading to a business that would have been relatively high valued. Now the best assets of the company have been sold which means that Boral is restricted to its mature Australian assets which have negative growth prospects and increasing risk. On that basis alone Boral shares are probably massively overvalued.
In addition. Borals major shareholder Seven group has 70% shareholding in Boral but no cashflow and a huge amount of debt which it will have to try to pay off from other sources. In a worst case scenario, Seven Group could be forced to sell its Boral shares to pay off the debt it used to pay for the acquisition of the Boral share in the first place.
Either scenario could see a short term wipe out in the Boral share price.
BLD Price at posting:
$3.00 Sentiment: None Disclosure: Held
