Phi Finney McDonald acts for the Representative Applicant in class action proceedings commenced against Boral Limited (Boral) in the Federal Court of Australia on behalf of investors who acquired Boral shares, American Depository Receipts (ADRs) or Equity Swaps during the period from 21 November 2016 to 10 February 2020 (inclusive) (Claim Period).

This action is being funded by Therium Litigation Finance AF IC. To register your interest and obtain more information about the class action, please email classactions@phifinneymcdonald.com.

Background

On 21 November 2016, Boral announced its AU$3.5 billion acquisition of Headwaters Incorporated, a company based in the United States of America that manufactured building products and construction materials. Prior to this, in July 2016, Headwaters acquired a group of businesses which manufactured and sold premium windows (Windows).

On 26 August 2019, Boral announced its FY19 Results, which presented a positive picture in relation to Boral’s FY19 EBITDA, NPAT and Headwaters synergies. Notwithstanding this, Boral guided the market to expect NPAT in FY20 of between AUD$374m-AUD$418m (down by about 5-15% on previous year) (FY20 Guidance). In the three trading days following this announcement, Boral’s share price declined by 10.63%.

On 5 December 2019, Boral announced that it had identified certain financial irregularities involving misreporting in its Windows business, that an investigation was being conducted and that the estimated earnings impact was between US$20-US$30 million. In the three trading days following this announcement, Boral’s share price declined by 8.70%.  On 6 December 2019, Boral revealed that by October 2017, an internal audit had identified that Windows’ internal systems were inadequate, and additional internal audits in 2018 and January 2019 also raised issues (collectively; Internal Audits).

On 10 February 2020, Boral announced that the investigation had concluded and that finance personnel within Windows had manipulated financial statements primarily to artificially inflate Windows’ overall profitability, during an approximately 20-month period prior to the end of October 2019. As a result, Boral restated its historic earnings by US$22.6 million, US$3.8 million of which related to FY18 and US$18.8 million related to FY19. In the three trading days following this announcement, Boral’s share price declined by 7.43%.

Allegations

It is alleged that Boral contravened its continuous disclosure obligations, including by failing to promptly inform the market:

  1. that Boral did not conduct a detailed due diligence of Headwaters prior to acquisition; and would not be able to provide an accurate assessment of the financial position of Windows and Headwaters; and
  2. of the outcome of the Internal Audits and the financial irregularities referred to above.

It is also alleged that Boral engaged in misleading or deceptive conduct, including by representing to the market that Boral had conducted a rigorous due diligence of Headwaters prior to acquisition, and that the Headwaters acquisition would have a strong positive impact on Boral’s shareholder value; that Headwaters had delivered certain synergy results; and that Boral expected to achieve the FY20 Guidance.

The class action alleges that Boral’s share price was inflated by the above conduct, and that shareholders suffered loss and damage.