Boral Sells Its North American Building Products Business

Boral Limited has entered into an agreement with a subsidiary of Westlake Chemical Corp. to sell its North American Building Products business for US$2.15 billion.

The transaction will not result in the payment of any income tax in the United States or Australia, as a result of carried forward losses.

Following the sale, Boral’s net debt target will reduce from ~A$1.5 billion to ~A$1.3 billion. This is in line with Boral’s financial framework which targets an optimal net debt range of 2-2.5 times EBITDA where ROFE equals WACC. Based on Boral’s net debt position at 31 May 2021 of ~A$800 million, as disclosed in Boral’s Target’s Statement, the lower net debt target results in surplus capital of ~A$500 million. Proceeds from the sale of US$2.15 billion (~A$2.9 billion) will add to this surplus1.

The Board will assess options to distribute surplus capital having regard to the size of the surplus and the most appropriate method for distribution to shareholders at the relevant time.

Boral’s CEO and Managing Director Zlatko Todorcevski said: “We are pleased to announce that we have entered into an agreement to sell Boral’s North American Building Products business, which is expected to unlock significant value for Boral’s shareholders. This agreement follows an extensive market testing process in which we received strong interest from a broad range of high calibre potential buyers.

“The sale will generate further significant surplus capital once the transaction closes. In accordance with Boral’s financial framework, after optimising Boral’s net debt position and allowing for reinvestment needs, we expect a significant surplus to be available for distribution to Boral’s shareholders.

“The Board will determine the most appropriate way to return surplus capital to shareholders taking into account the availability of franking credits, the relative share price and the preferences of Boral shareholders as a whole.

“Boral has owned and operated building products businesses in the USA for more than 40 years and we recognise and value the contribution that our North American building products’ employees and customers have made to the Boral Group over that time.

“The level of market interest and the acquisition price reflects the fact that Boral’s Building Products is a portfolio of great businesses with quality products, strong brands and good positions in many geographies.

“We are confident that this change of ownership to Westlake, with its strong history and focus on innovative exterior building products, will support the prospects for our North American Building Products business, which includes Roofing, Stone, Light Building Products and Windows businesses.”

The transaction is subject to customary conditions precedent and completion adjustments. We are expecting to complete the transaction in the first half of FY2022, allowing for the regulatory approval process.

Boral and Westlake will work together to ensure a smooth transition for customers and employees.

The profit on sale of the business is expected to be disclosed as part of Boral’s full year FY2021 results on 24 August 20212.

As part of the review of Boral’s North American Fly Ash business (announced on 15 April 2021), Boral is continuing to explore value creation opportunities through a potential joint venture, strategic alliance, divestment to a third party or continued ownership of the Fly Ash business. We expect to be in a position to update the market at our full year results announcement in August, or earlier if appropriate.

Independent Expert’s Report implications
In its Independent Expert’s Report dated 10 June 2021, Grant Samuel valued the equity in Boral at A$9.7–A$10.8 billion, corresponding to a value of $8.25–9.13 per share. Grant Samuel has not been asked to issue a revised report reflecting the final sale price at this time. However, it has advised Boral that the final price agreed for the sale of its North American Building Products business of US$2.15 billion exceeds the US$1.8–US$2.0 billion valuation range attributed to it in its report.

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