CSR $9 cash per share takeover bid likely to settle by June 30

About CSR Limited

CSR Limited (CSR, the Group, ASX: CSR) was founded in 1855 as the Colonial Sugar Refinery Company, from which it derives its name. CSR commenced manufacturing plasterboard in 1947 and today is a leading building products business in Australia and New Zealand. The Group employs 2500 people and services 12,000 customers out of 140 sites, including 30 manufacturing plants.

Two cents per month ticking fee

In a clever move to expedite implementation of the Scheme of Arrangement (Scheme) between Saint-Gobain and CSR for acquisition of all the shares in CSR for $9 cash a share, two cents per share per month will be payable to CSR shareholders if the Scheme is delayed beyond 26 June 2024. The ‘ticking fee’ is designed to compensate CSR shareholders for lag time beyond what is considered a reasonable transaction implementation period. The fee amount is calculated daily and if it becomes payable, will not be deducted from the $9 per share cash offer price.

High-level preliminary talks between the two companies are rumoured to have commenced a year ago although it wasn’t until February 2024 that CSR confirmed it had received a non-binding, indicative proposal from Saint-Gobain to acquire 100 percent of shares in the Company for $9 cash a share. The CSR board have negotiated a generous $4.32 billion takeover offer that is at a 61 percent premium to the volume-weighted-average share price to 20 February 2024 when the takeover offer was officially announced. The offer price is at an EV / EBITDA multiple of 12.4 times, based on CSR’s EBITDA to September 2023. The cash offer has been unanimously recommended by the CSR board and contains limited termination rights. CSR shareholders are entitled to be paid a fully franked cash dividend of 25 cents per share for the financial year ending 31 March 2024 which will be deducted from the cash offer price. Closing of the offer is conditional on FIRB approval and on CSR shareholders and the Court giving final approval.

The bidder is Paris-based Saint-Gobain, a worldwide leader in light and sustainable construction with a $57 billion market capitalisation and operations in 75 countries, employing 168,000 people. Saint-Gobain is drawn to CSR’s growth opportunities in the Australian construction and industrial market and expects to extract $60 million in synergies by the third year of ownership. Fifty million of identified synergies will be extracted from the cost side and $10 million of synergies have been identified on the growth side.

Take-over strategic rationale

Saint-Gobain is drawn to the high-growth Australian construction market which is supported by a growing population underpinned by immigration and an increasing need for light and sustainable construction solutions.

Saint-Gobain has indicated its intention to ‘monetise’ CSR’s Property portfolio in the short to mid-term for at least $1.3 billion. CSR holds a 25.2 percent interest in the Tomago aluminium smelter in NSW and Saint-Gobain has stated its intention to explore its options going forward.

CSR and Saint-Gobain have an established business relationship that has deepened since 2019 based on sharing Saint-Gobain’s glass wool technology under license. Moreover, CSR operates a similar business model to Saint-Gobain which should readily integrate with the CSR business model as Saint-Gobain is managed by country. Accordingly, the merged Group will rely on CSR’s management team to manage the Australian operations.

The compelling value for CSR shareholders is why this $4.32 billion transaction has progressed smoothly and will settle within a few months.