USG Corporation and Boral Limited today announce the completion of their previously communicated 50/50 strategic joint venture, USG Boral Building Products. The joint venture creates a world-leading building products business with sales and operations across Asia, Australasia and the Middle East.
In connection with the joint venture, Boral has contributed its Gypsum division, which includes its plasterboard operations in Australia and Asia, and USG has contributed its Asian and Middle Eastern businesses, as well as exclusive access in the joint venture’s territory to its world-leading ceilings, cement board, fibre board, and lightweight plasterboard and joint compound building products technologies.
As consideration for its 50% ownership in the joint venture, in addition to contributing its Asian and Middle Eastern businesses and certain intellectual property, USG made a cash payment of US$500 million to Boral. Boral will also have the opportunity for up to US$75 million in earn out payments over five years if the joint venture achieves specific performance targets.
USG, which funded its cash payment to Boral with the net proceeds of a recently completed US$350 million senior note offering and cash on hand, made an additional cash payment to Boral of US$13 million based on a customary initial estimate of the net debt and working capital positions of the contributed businesses. Additional cash adjustments are expected upon finalisation of the accounts as of 28 February, 2014.
USG’s Chairman, President and CEO Jim Metcalf stated, “The joint venture gives USG an immediate, significant presence across some of the fastest growing construction markets in the world, and positions both USG and Boral to win over the long-term in Asia, Australasia, and the Middle East. Our teams will work quickly to deploy USG’s technologies to the facilities in the region and we expect that our combined efforts will enable the joint venture and its customers to achieve greater productivity and profitability.”
USG Boral Building Products has 633 million m2 (6.8 BSF) of plasterboard manufacturing capacity across 25 plasterboard lines and 12 countries. Synergy realisation will ramp up over time and is expected to exceed US$50 million per annum within three years of the new technologies being rolled out. Manufacturing and freight cost savings, revenue enhancements generated by a superior product offering, and complementary products sold through existing sales channels will drive synergies.
“The completion of the transaction is an important milestone in our joint venture with USG. Our teams have come together effectively and productively and have great momentum and determination to deliver on the strategic imperatives of the joint venture. We are focused on maximising value for our customers and our shareholders,” said Boral’s CEO & Managing Director, Mike Kane. “The joint venture aligns with Boral’s goal to grow earnings from Asia and to transform the business over the longer-term through innovative product and manufacturing solutions. Boral’s balance sheet will also strengthen considerably as a result of the transaction.”
Management of the joint venture will be shared between Boral and USG with Frederic de Rougemont from Boral appointed as CEO and Paul Monzella from USG appointed as CFO. USG has appointed the Chairman, Jennifer Scanlon, Senior Vice President and President USG International. The right to appoint the Chairman will alternate every two years.