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Boral sells North American building products business


Boral has agreed to sell its North American building products business to Westlake Chemical Corporation for $USD2.15 billion ($AUD2.86 billion).

According to an independent expert’s report, released earlier in June, Boral’s North American building products business was valued at between $USD1.8 billion and $USD2 billion.

The North American arm includes roofing, stone, light building products and windows businesses.

Boral chief executive officer and managing director Zlatko Todorcevski said profits from the sale would present great value and provide more incentive for shareholders to turn down a bid from Seven Group Holdings (SGH) to increase its stake in the company.

“The sale will generate further significant surplus capital once the transaction closes,” Todorcevski said.

“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.”

SGH’s offer to buy all Boral shares at $6.50 per share opened on 25 May and was due to close on Wednesday, 30 June. On 25 June 2021, SGH announced its Offer Price remains $6.50 per Boral Share, but that it will increase the Offer Price to $7.30 per Boral Share if certain conditions are satisfied. And if additional conditions are satisfied SGH will increase its Offer to $7.40 per Boral Share. The Offer is now scheduled to close on Friday, 2 July 2021, unless extended. As of 25 June, 2021, Boral shares were trading at a price of $7.34.

SGH, which owns Caterpillar distributor WesTrac and rental equipment business Coates Hire, now holds a 24.19 per cent stake in Boral but is hoping to increase that to around 30 per cent. That could effectively give SGH a controlling influence of the company.

Sale of North American businesses

Boral had owned building products businesses in North America for more than 40 years and 39 per cent of its employees (6305 people) worked in North America, according to its 2020 annual report, with a majority being in the building products business.

In the 2020 report, Boral chairman Kathryn Fagg said the North American arm was performing below par.

“In addition to the challenges presented by the external environment, our North America business, including the Headwaters acquisition, has not yet met our expectations, reflecting shortcomings in operational execution and a softer than expected US housing market,” Fagg said.

Todorcevski said there had been great interest in purchasing the North American business, and Boral believes Westlake will be able to succeed with it.

“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,” Todorcevski said.

“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.”

Shareholders again urged to turn down SGH bid

In an ASX statement issued on 22 June, Fagg reiterated that the sale was a positive sign for shareholders that Boral is travelling in the right direction.

“Boral’s Target’s Statement set out details of Boral’s strategy, including its expectation of unlocking significant value in the near-term from the potential divestment of assets to deliver value for shareholders. Our announcement on 21 June 2021 regarding the sale of North American Building Products to Westlake Chemical Corporation demonstrates that we are delivering on this strategy.

“The sale is expected to generate significant surplus capital once the transaction closes. Based on Boral’s financial framework, we estimate this surplus (prior to any reinvestment alternatives) to be ~$3.6 billion which equates to $3.02 per share. The Company will determine the appropriate form of any return to shareholders, which may involve further shareholder approvals.

“We continue to believe the SGH Offer significantly undervalues your shares in Boral and encourage all shareholders to REJECT the offer by TAKING NO ACTION.”

This message was reinforced in a third supplementary Target’s Statement released by Boral on 25 June, 2021.

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