Building materials manufacturer Boral Limited and USG Group have agreed to a joint venture to combine Boral’s manufacturing and distribution network and USG’s technologies and strategic assets.
USG is North America’s largest manufacturer of plasterboard and is headquartered in Chicago with operations servicing the commercial, residential and construction markets.
The JV which is now called USG Boral Building Products is worth US$1.6 billion and will be owned 50 percent by Boral and 50 percent by USG, according to the former’s news release. The JV will operate in 12 countries across Asia, Australasia and the Middle East.
USG will make an upfront cash payment to Boral of US$500 million on completion which is expected on January 2014, with additional earn out payments to Boral of up to US$75 million.
Combining USG’s technologies and Boral’s extensive network in the region will create a vehicle that will deliver a superior offering to one of the fastest growing plasterboard markets in the world. The JV is expected to give the business a 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 and 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.”
Meanwhile, USG’s President and CEO Jim Metcalf said the company is excited by the prospects for profitable growth through the strategic partnership.
“We have long been focused on our strategic plan to diversify our earnings and differentiate our business through innovation,” said Mr. Metcalf.
“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.”
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, according to the statement.
The deal 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.
