Gypsum industry news

Australia: Boral has given details of its US$1.02bn sale of the 50% stake in USG Boral to Germany-based Knauf. It said that it expects the transaction to close in the 2021 financial year, adding, “If the transaction has not closed by 30 September 2021 – where Knauf has not completed certain divestments required by regulators – then, if either party terminates, Knauf must pay Boral a termination fee of US$50.0m.”

Chief executive officer (CEO) and managing director Zlatko Todorcevski said, “We have been working with Knauf for some time to find the best path forward for the business following Knauf’s acquisition of our joint venture partner USG. We recognise that it makes sense for Knauf – being the world’s largest plasterboard player – to have 100% ownership of the business. USG Boral is a great business, and very well positioned to perform strongly under the ownership of Knauf. The strength of the joint venture business and its prospects are fully reflected in the sale price as demonstrated by the attractive premium, which is a great outcome for Boral shareholders. The sale of Boral’s interest in USG Boral to Knauf will be a step to simplifying Boral’s geographic footprint and product portfolio.”

Final cash proceeds “will be applied to reduce net debt and fund growth investment in the retained portfolio” and remain subject to “post-completion adjustments.”

Australia/Singapore: Knauf has agreed to buy Boral’s 50% stake in USG Boral for US$1.02bn, bringing its total stake in the former Boral and US-based USG joint venture to 100%. The joint-venture includes gypsum wallboard-based businesses in Australia, New Zealand, Asia and the Middle East. The deal is “subject to typical conditions precedent including in relation to regulatory matters.”

Boral chief executive officer (CEO) and managing director Zlatko Todorcevski said, “We have been working with Knauf for some time to find the best path forward for the business following Knauf’s acquisition of our joint venture partner USG. We recognise that it makes sense for Knauf – being the world’s largest gypsum wallboard player – to have 100% ownership of the business. USG Boral is a great business, and very well positioned to perform strongly under the ownership of Knauf. The strength of the joint venture business and its prospects are fully reflected in the sale price, as demonstrated by the attractive premium, which is a great outcome for Boral shareholders. The sale of Boral’s interest in USG Boral to Knauf will be a step to simplifying Boral’s geographic footprint and product portfolio.”

Australia: Boral has reported that, in most jurisdictions, its activities are currently considered to be within the critical infrastructure and construction sectors that are permitted and encouraged to continue as essential businesses. This includes Boral’s US Fly Ash business, which provides an essential service to the energy sector. In some areas however, particularly in North America and Asia, more stringent mandates and restrictions have resulted in temporary closures of several operations.

In addition, demand is declining in most markets and is expected to continue to decline, particularly in residential construction markets where the pipeline of work is substantially reducing in all geographies.

As a result, where it has sufficient inventory levels to supply customers, production curtailments are planned and are now taking place, including shift reductions and temporary plant closures. Boral says that these actions will help to conserve cash and minimise any unintended inventory build-up.

Boral is supporting employees impacted by temporary closures with access to paid leave, unpaid leave, flexible and remote working arrangements (where possible) and assistance with accessing relevant government support.

Australia: Boral has updated the market on its transaction with Knauf in relation to its USG Boral joint venture. On 19 March 2020, Boral announced that its view was that the Australian Competition and Consumer Commission (ACCC) was unlikely to approve the call option in relation to the Australian and New Zealand business. In further discussions between Boral and Knauf, it has now become clear that obtaining the necessary regulatory approvals required to allow the transaction to be implemented as signed in August 2019 is not achievable by the 30 June 2020 deadline. Other conditions to the transaction also remain outstanding.

As a result, Boral and Knauf will consider a range of potential options, with Boral’s objective being to target a cash neutral transaction rather than a transaction with a significant funding requirement for Boral. Discussions are at a preliminary stage and any revised transaction remains subject to agreement between Boral and Knauf, and ultimately will also require the approval of regulators including the ACCC and New Zealand Commerce Commission (NZCC). Given this, the company’s pre-existing US$400m acquisition bridge facility, put in place for the purpose of completing the transaction with Knauf, was allowed to lapse.

Australia: Boral, already dealing with financial difficulty even before the coronavirus pandemic, has withdrawn its full-year profit guidance and warned that it will likely have to re-work its complex wallboard buyout transaction with USG / Knauf. The US$441m deal, announced in August 2019 with Knauf will likely need to be changed, after the Australasian component of it attracted the attention of the Australian Competition and Consumer Commission (ACCC).

Under the complicated deal between USG Boral and Knauf, Boral was to pay US$200m for the other 50% of USG Boral that it did not already own in Australia, and US$241m for a 50% stake of the plasterboard joint venture in Asia. Knauf then had a call option to return to 50% ownership of the Australasian business within five years.

However, the ACCC is now looming as a roadblock. "As Boral and Knauf work with regulators as part of an ongoing process to obtain the relevant approvals, Boral's view now is that the ACCC is unlikely to approve the call option in relation to the Australian and New Zealand business," said Boral in a statement. This means a range of other options will be considered for the transaction.

Australia: Boral has announced that it is ‘considering a range of potential options’ regarding its planned resumption of 100% ownership of USG Boral Plasterboard from Germany-based Knauf in light of the fact that the Australian Competition and Consumer Commission (ACCC) is ‘unlikely to approve the call option in relation to the Australia and New Zealand business.’ The call option would have given Knauf the right to return to 50% ownership of USG Boral Plasterboard within five years. The ACCC’s likely intervention in the transaction is believed to have to do with Boral’s financial situation.

Australia: Boral has seen a 40% decrease in its profit during the first half of its fiscal year a period that ended on 31 December 2019. Its profit fell to US$90.4m for the period from US$151m a year earlier. Boral said that this was due to higher costs and weak housing activity in Australia and South Korea. It was also affected by the costs of transactions between its USG-Boral joint-venture partner USG and Knauf, which bought USG in 2019, along with its interest in USG-Boral.

Australia: The board of directors of Boral has announced that Boral CEO and managing director Mike Kane will declare his retirement after delivering the company’s whole-year 2020 (1 July 2019 to 30 June 2020) results in mid-August 2020. Kane said, “I am proud of Boral’s people and I thank them for their continued support as well as the support of our customers. I remain committed to Boral and look forward to delivering Boral’s full-year 2020 results and facilitating a smooth leadership transition.”

The Sydney Herald newspaper reported that Boral revised its whole-year net profit forecast up from US$214m to US$228m, which would be down by 19% from US$281m in the Australian financial year 2019.

Australia: US-based private equity company Lone Star Funds is considering acquiring Boral, according to the Australian newspaper. Lone Star Funds purchased building materials manufacturer Forterra from Heidelberg Cement. Boral later formed a joint venture with Forterra Brick in the US in 2016. In a separate deal Lone Star Funds later purchased German building materials producer Xella. Despite growing revenue from continuing operations, Boral’s net profit after tax fell by 7% year-on-year to US$301m in the year to 30 June 2019.

Australia: USG-Boral’s earnings have fallen due to a poor construction market in South Korea. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 6% year-on-year to US$170m in the financial year to 30 June 2019 from US$181m in the previous year. Its revenue grew by 2% to US$1.08bn from US$1.06bn. The joint venture said that, excluding South Korea, earnings were ‘steady’ as lower earnings from Indonesia, China and the Philippines were offset by increased contributions from Thailand, Vietnam and India, as well as a continued strong contribution from Australia.

The company also announced that Boral has entered into an agreement with Germany’s Knauf to form an expanded 50:50 plasterboard joint venture in Asia and for Boral to return to 100% ownership of USG Boral Australia & New Zealand. Completion of the deal is subject to regulatory approval. It follows the acquisition of USG by Germany’s Knauf in early 2019.