By Scott Murdoch and Roushni Nair
(Reuters) -Australia's Boral (OTC:BOALY) on Tuesday recommended investors reject its largest shareholder Seven Group Holdings' A$1.9 billion ($1.25 billion) offer for the company claiming it undervalues the building products group.
Seven Group, controlled by billionaire Kerry Stokes and his family, already owns nearly 72% of Boral and had launched a bid last month to acquire full control of Boral.
The proposal of a minimum of A$6.05 per Boral share consists of 0.1116 Seven Group shares and A$1.50 cash. The offer could go as high as $A6.39 per share if certain acceptance rates are met.
Grant Samuel, the independent expert firm, assessed fair value for Boral in the range of A$6.50-A$7.13 per share, the company said.
"While we respect the work that the bid response committee has put into arriving at this recommendation, we obviously disagree with their assessment strongly," Seven Group Chief Executive Ryan Stokes said in a statement on Tuesday.
The Seven offer values Boral at A$6.67 billion ($4.35 billion) and represents a 3.4% premium to its last closing level of A$5.850 on Feb. 16 before the bid arrived.
Seven earlier said it would raise the offer by another 10 Australian cents if it gained an aggregate 80% stake in Boral or if Boral's board unanimously recommended the offer to its shareholders, or both.
The offer would increase by another 10 cents if Seven Group's stake reaches 90.6%, the compulsory acquisition threshold.
The bid was declared best and final which means Seven cannot increase it again.
Grant Samuel concluded Seven Group's offer was "not fair and not reasonable", after which all Boral directors other than Seven Group nominees intend to reject the offer, the company said in a statement.
Boral said only 11.66 million shares had accepted the Seven offer since it opened on March 4, representing 1.06% of its total issued shares.
($1 = 1.5253 Australian dollars)