Boral sold on plasterboard link
A little 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 ($602 million) as it moves to access new-generation 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 to the value of $US1.35 billion and USG $US250 million, including patents covering new-generation 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 will be included in the joint venture.
"This is a technology deal, first and foremost," Boral chief executive Mike Kane told analysts.
Boral had extensive plasterboard production and distribution operations throughout the region, but had been concerned about its lack of access to new-generation technology, he said.
USG has developed a plasterboard product it claims is 30 per cent lighter than the traditional product, stronger and more resistant to sagging, which is potentially important in the Asian market.
The French industrial group Lafarge wanted to sell its Asian venture, which was formed more than a decade ago, "which paved the way to enter this 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 about half will be the capital cost of changes to the plants and the balance operating costs in training, marketing and the like.
Boral expects to receive the $US500 million early next year, 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 buy-back or a special dividend.
Investors' positive reaction pushed Boral shares up 28¢ to close at $5.03. Analysts were less enthusiastic, since Boral will face some earnings erosion initially.
"Everyone knows Boral overpaid when it bought Lafarge out of the venture a couple of years ago," one analyst said. "So to get a price remotely near what it paid Lafarge is a pretty good outcome.
"If you believe the story, it's got access to a premium product, but Asians are very price-sensitive.
"But with the deal, at least Boral has avoided a write-down in a few years' time."
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