Aussie tycoon stands on precipice of M&A glory

WESFARMERS

09/09/2026 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.
By Antony Currie
MELBOURNE, Sept 9 (Reuters Breakingviews) - Ryan Stokes is one big deal away from securing his place in the M&A firmament. The CEO of conglomerate SGH SGH.AX, and son of media mogul Kerry, tried to pull off Australia's biggest domestic corporate takeover, of BlueScope Steel BSL.AX. An uncharacteristic setback will probably only be temporary. As he reshapes the empire to better suit the modern world, others will be subjected to his patient and crafty tactics.
Stokes is a child of the generation that designed the business landscape Down Under. In the late 1970s, his father started buying Seven television network franchises, including from one of the country's most accomplished tycoons, Rupert Murdoch. A few years later, the elder Stokes added a heavy-machinery franchise, now called WesTrac, that has become an integral part of the company.
After turning 50 this year, Ryan looks well-positioned to carry on the acquisitive tradition. Although Kerry's maneuvering from Melbourne largely escaped the sort of scrutiny attracted by merger mavens such as Murdoch, Li Ka-shing, John Malone, Carlos Brito and Bernard Arnault, his son may yet command greater recognition for wheeling and dealing. Many CEOs are lucky to nail down one or two splashy mergers. In Australia, private equity firms like Brookfield now dominate, with corporate buyers like BHP BHP.AX accounting for only four of the top 20 buyers by volume since 2015, per data compiler Dealogic.
Whatever follows, BlueScope will be pivotal. SGH, with U.S. partner Steel Dynamics STLD.O, valued the Aussie steelmaker at A$15 billion, or nearly $11 billion, but the board rejected their overtures. Although Stokes confirmed last month that the deal is on ice, he intends to expand SGH by capitalizing on a housing shortage and the AI data centre-fuelled construction bonanza.
He emphasizes operational discipline to improve returns and cash flow at businesses he considers good fits under the A$16 billion SGH umbrella. In addition to WesTrac, the portfolio includes equipment-rental giant Coates; building-materials maker Boral; oil-and-gas driller SGH Energy; and a 30% stake in $2 billion Beach Energy BPT.AX. It also owns 20% of Southern Cross Media SXL.AX, the TV, radio and newspaper group where Stokes became chair on Monday, a role once held by his father.
Investing in those units is the priority, but M&A is "a key pillar of our growth strategy" to increase operating profit 10% over time, Stokes told investors last month.
The approach has served shareholders well. A $100 investment when Stokes became CEO in 2015 would be worth $947 today, including dividends, more than twice the return of the similarly sprawling Wesfarmers WES.AX and 12 times the broader market performance.
Stokes was promoted to the top job the same year that SGH, then known as Seven Group Holdings, bought 20% stakes in Beach Energy and peer Drillsearch. Within months, the two companies merged.
His perseverance soon became evident. Stokes made use of the so-called creep provision, which limits any investor with at least a 20% holding to buying no more than 3% extra every six months. The rule is designed to prevent an interloper from quickly taking control without paying a premium. In practice, it means a restrained shopper can slowly but steadily bulk up, often at a more reasonable price. SGH has held its Beach Energy stake steady at 30% since 2018.
SGH also uses minority positions as beachheads. In 2017, for example, Stokes acquired the 53% of Coates his company didn't already own, from buyout shop Carlyle CG.O. He used a similar playbook in his pursuit of Boral, where his M&A capabilities gained broader notice.
Stokes started buying shares in the cement and asphalt manufacturer in March 2020, growing the stake to 20% in six months. After SGH added another 3%, it unveiled a tender offer for the rest, valuing Boral's equity at A$8 billion. The board offered no premium and said it would be "satisfied" with increasing its holding to 30%.
The gambit deprived the target's shareholders of any uplift on the stock price, but Stokes read the situation well: within weeks, his company owned 71% of Boral. Three years later, he mopped up the rest, securing cash flow that helped reduce SGH's net debt to 1.8 times EBITDA, below its stated cap.
These past successes make the BlueScope situation all the more vexing. Stokes waited until he found a partner willing to absorb the larger U.S. business. With the 32% control premium they offered, BlueScope stock soared to a 17-year high.
Moreover, SGH shareholders embraced the plan: the stock closed up nearly 4% on the day the deal news broke, even though the implied return on investment only worked out to about 6%, according to Breakingviews calculations, below SGH's stated 10% minimum target. Stokes evidently earned the benefit of the doubt: Boral's return on capital employed in the 12 months to the end of June was just shy of 20%, up considerably from 2021.
In this case, however, Stokes and his U.S. counterpart were too clever by half. They pegged their offer to BlueScope's dismal performance in the previous financial year, even though analysts were already forecasting operating earnings would increase by more than 50%, per LSEG data. If anything, the bid helped illuminate the rebound. AustralianSuper, the country's largest pension fund, had built a 12% position in BlueScope in 2025 and said it would only consider a "materially higher" price, while it increased its stake to almost 14%.
The fund's pressure evoked its successful campaign against another joint deal, Brookfield and EIG's offer to buy Origin Energy ORG.AX for $13 billion in 2023. BlueScope's second-largest shareholder with some 7%, L1 Capital, also wanted a higher offer. Combined, that emboldened the steelmaker's board to reject the overture. Since then, the company's shares have clung to their Stokes-induced gains, while SGH's have dropped by about a fifth, despite solid earnings disclosed last month.
This disparity in valuations, and presumably some good financial sense, explains why SGH backed off. It also gives Stokes breathing room to assess what went wrong. There almost certainly will be a next time, whether it's BlueScope or another chunky industrial target subjected to his cagey deal tactics. The difficulty may be that his reputation now precedes him.
Follow Antony Currie on Bluesky and LinkedIn.
     
CONTEXT NEWS
     Southern Cross Media said on September 7 that board member and SGH CEO Ryan Stokes would become non-executive chair with immediate effect, replacing Teresa Dyson, who will become a non-executive director overseeing a newly established risk, regulatory and compliance committee. Cathy O'Connor was elected as lead independent director at the Australian media company, whose holdings include the Seven Network, the Triple M radio networks and The Sunday Times.

(Editing by Jeffrey Goldfarb; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on CURRIE/antony.currie@thomsonreuters.com))