USG Corp. (USG)

[Enterprising Investor]

Boral Limited and USG Corporation to Form a World-Leading Plasterboard & Ceilings Joint Venture in Asia, Australasia & the Middle East (10/16/13)

• Combines USG’s best-in-class building products technologies and strategic assets in Asia, New Zealand and the Middle East with Boral’s leading plasterboard manufacturing and distribution footprint in Asia and Australia

• Leading share positions in most markets served and uniquely positioned for synergistic expansion

• US$1.6 billion1 50/50 joint venture with operations in 12 countries across Asia, Australasia and the Middle East

• USG to make upfront cash payment to Boral of US$500 million on completion2, with potential additional earn out payments to Boral of up to US$75 million

CHICAGO--(BUSINESS WIRE)--Boral Limited (ASX:BLD) and USG Corporation (NYSE:USG) today announced that they have entered into agreements to form a strategic joint venture to create a world-leading building business, USG Boral Building Products. The 50/50 joint venture will leverage the two companies’ iconic brands, complementary geographic footprints and technological expertise to deliver a unique portfolio of building products across Asia, Australasia and the Middle East.


“The transaction is a major step forward for Boral and our vision is to create a world-leading interior linings business in Asia, Australasia and the Middle East”

Boral will contribute its Gypsum division to the joint venture, which includes its plasterboard operations in Australia and Asia. USG, the largest North American manufacturer of plasterboard, will contribute its Asian and Middle Eastern businesses, as well as exclusive access to its world-leading ceilings, cement board, fibre board, lightweight plasterboard and joint compound building products technologies in the joint venture’s territory.

Bringing together the game-changing technologies and expertise of USG with Boral’s leading manufacturing and distribution network in the region creates a vehicle that will deliver a superior offering to one of the fastest growing plasterboard regions in the world. This combination is expected to position the business with a significant competitive advantage and market leadership position for the long-term.

“The transaction is a major step forward for Boral and our vision is to create a world-leading interior linings business in Asia, Australasia and the Middle East,” said Boral’s CEO & Managing Director, Mike Kane. “The joint venture strategically aligns with Boral’s goal to grow earnings from Asia over the longer-term by effectively leveraging our extensive distribution position with complementary building products and markets. In addition to equipping the Gypsum division for long-term accelerated growth in Asia, the joint venture with USG creates a strong competitive advantage for the Australian plasterboard business through the application of game-changing technologies, significantly strengthens Boral’s financial position and provides greater strategic flexibility to the Boral group. This joint venture will be value accretive for our shareholders.”

USG’s Chairman, President and CEO, Jim Metcalf, stated, “We are excited by the prospects for profitable growth through this strategic partnership. We have long been focused on our strategic plan to diversify our earnings and differentiate our business through innovation. The joint venture with Boral, Asia’s leading plasterboard manufacturer and distributor, gives USG the reach to immediately expand our world-leading building products operations outside North America, and enables both companies to more effectively capitalize on market opportunities in some of the world’s highest growth construction markets.”

The roll-out of new technologies across the joint venture operations will be phased over two years and involve a total investment of approximately US$50 million, which is expected to be self-funded through the joint venture.

The Joint Venture is anticipated to benefit from significant synergies, which will ramp up over time and are expected to exceed US$50 million per annum within three years of the new technologies being rolled out. Synergies will come from manufacturing and freight cost savings and will also include revenue enhancements generated by a superior product offering and complementary products that will be sold through existing sales channels.

Frederic de Rougemont, CEO of Boral Gypsum and appointed CEO of the joint venture, said: “The combination of our gypsum and related businesses in Asia, Australasia and the Middle East provides an unparalleled manufacturing and distribution footprint, encompassing some of the highest growth markets in the world. The joint venture’s access to USG’s unrivalled technology and continued innovation will provide the business with superior performing products that are lighter, stronger and more efficient to manufacture, transport and install. This will build on Boral’s well-established gypsum operations in the region, creating a formidable and sustainable leadership position.”

The joint venture will be owned 50% by Boral and 50% by USG. In order to achieve an interest of 50% in the joint venture, USG will pay Boral total cash payments (equalisation payments) of up to US$575 million. USG’s equalisation payments to Boral will occur in tranches, with a portion conditional on the business meeting budgeted targets, as follows:

• US$500 million upon deal agreement completion;

• US$25 million on the 3rd anniversary of completion if joint venture earnings targets have been achieved at that time; and

• US$50 million on the 5th anniversary of completion if joint venture earnings targets have been achieved at that time.

The joint venture will have 633 million m2 (6.8 BSF) of plasterboard manufacturing capacity supplemented by an extensive portfolio of complementary building product operations spanning 12 countries. Management of the joint venture will be shared between Boral and USG with Frederic de Rougemont from Boral Gypsum appointed as CEO and Paul Monzella from USG Corporation appointed as CFO. USG will appoint the Chairman, Jennifer Scanlon, with the right to appoint chairman alternating every two years.

Targeted completion is currently anticipated to occur on or by 31 January 2014 and is subject to certain closing conditions, including Foreign Investment Review Board (FIRB) approval, third party consents, and other conditions precedent as are customary for this type of transaction.

Further detail about the transaction, the joint venture assets, agreed joint venture terms and company specific impacts are outlined in the accompanying presentation.

http://www.businesswire.com/news/home/20131016006596/en/Boral-Limited-USG-Corporation-Form-World-Leading-Plasterboard