Boral sells off slice of plasterboard business for technology's sake

Just over a year after paying $598 million to take full control of its Asian plasterboard business, Boral has agreed to sell half its holding for up to $US575 million ($603 million) as it moves into the latest technology.

Just over a year after paying $598 million to take full control of its Asian plasterboard business, Boral has agreed to sell half its holding for up to $US575 million ($603 million) as it moves into the latest technology.

Boral on Thursday agreed with the American firm USG, formerly known as US Gypsum, to place all of their Asia, Pacific and Middle East plasterboard operations into a 50-50 venture.

As part of the agreement, Boral is contributing assets valued at $US1.35 billion and USG $US250 million, including patents covering new plasterboard products. To equalise their contributions, Boral will receive $US500 million up front, along with a prospective further $US75 million, depending on future earnings.

Separately, USG is to fund the completion of a plasterboard plant in Oman, which is also to be included in the joint venture.

"This is a technology deal, first and foremost," Boral chief executive Mike Kane told analysts.

Boral has extensive plasterboard production and distribution throughout the region, but has been concerned about its lack of access to latest technology, he said.

USG has developed a plasterboard product that it claims is 30 per cent lighter than the traditional product, stronger and more resistant to sagging, potentially important in the Asian market.

The French industrial group Lafarge wanted to sell out of its Asian venture, formed more than a decade ago, and "which paved the way" to enter the joint venture with USG, Mr Kane said. The venture will be self-funded and the new production technology will be rolled out over the next two years, costing $50 million, of which around half will be the capital cost of changes to the plants and the rest running costs in training, marketing and the like.

Boral expects to receive the $US500 million payment early in 2014, and will use an initial $US250 million to repay debt, which has opened the door to "capital management initiatives", it said, without clarifying whether this could be a share buyback or a special dividend.

Investors reacted positively to the news, pushing Boral's shares up 28ยข to close at $5.03. Analysts were less enthusiastic, since Boral initially will experience some earnings erosion from the venture.

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