Boral sell 40% interest in Boral CSR Bricks joint venture
Company says now is right time to realize value and redirect capital to core operations
BORAL Ltd have agreed to sell their 40% interest in the Boral CSR Bricks joint venture to CSR Ltd for a total cash consideration of A$133.9 million. The sale is expected to be effective 1 November 2016.
In the year to 30 June 2016, Boral recognized an equity-accounted post-tax earnings contribution of A$11.7 million from their 40% interest in the joint venture. As a result of the divestment, Boral expect around a $6.5 million lower equity earnings contribution in financial year 2017 relative to 2016.
Boral will, however, recognize a A$20–$25 million post-tax profit on the sale, which will be reported as a significant item in financial year 2017.
The company will also retain ownership of the Scoresby brick site in Victoria, and will continue to lease it to CSR. Boral have an option to terminate the lease in 2025 with three years’ prior notice.
Boral’s chief executive officer and managing director, Mike Kane, said that while the joint venture had performed well and delivered significant synergies following integration of the two businesses, now was the right time to realize value for the business and redirect capital to Boral’s core operations, in line with the company’s strategy.
‘Our strategy has consistently been to optimize assets to maximize our returns across our Australian building products portfolio, including realizing value when the time is right.
‘Since its formation, the East Coast bricks joint venture has performed well and we have worked hard over the last 18 months to integrate our businesses and deliver operational and overhead efficiencies. As a result, we have together created a more sustainable business.
‘As majority owners, CSR are well positioned to capitalize on the further potential for operational and network efficiencies of the combined platform, and it’s the right time for Boral to realize the value from our investment and redeploy the capital into our core operations,’ said Mr Kane.
Meanwhile, Boral have confirmed that their previously announced North American bricks joint venture transaction with Forterra Brick is expected to complete tomorrow (1 November 2016) in the US. Boral will recognize their share of equity-accounted earnings from the 50:50 North American bricks joint venture effective 1 November 2016.