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Boral to acquire Headwaters Inc.

Boral CEO and MD Mike Kane

Company acquiring strategically compelling portfolio of US businesses for US$2.6 billion

BORAL have entered into a binding agreement to acquire Headwaters Inc. for US$24.25 per share in cash, representing an aggregate enterprise value of US$2.6 billion.

The acquisition, which is subject to customary closing conditions, including both Headwaters shareholder and regulatory approvals, is expected to complete in mid-2017.

Headwaters are one of the leading manufacturers of building products and one of the largest marketers of fly ash in the US, with US$1.1 billion of revenue and adjusted EBITDA of US$218 million.

They operate across two core divisions: Building Products and Construction Materials, both of which have strong market positions.

Two-thirds of Headwaters’ revenues (c.US$700 million) are derived from their Building Products division, whilst the Construction Materials division delivers around US$370 million of revenue a year and is one of the largest marketers of fly ash in the US.

Commonly used as a partial replacement for cement, fly ash is forecast to experience strong growth driven by growing cement consumption in ready-mixed concrete and the competitive cost position of fly ash relative to cement.

The acquisition is being partially funded via a fully underwritten A$450 million institutional placement and a fully underwritten A$1.6 billion, one for 2.22 pro rata accelerated renounceable entitlement offer.

The balance of the acquisition will be funded through a combination of US$0.8 billion of debt from a committed bridge acquisition facility and existing cash.

Boral say the acquisition will be a transformative step, resulting in the company having three strong divisions: high-performing and well-positioned Boral Australia; the fast-growing USG Boral business in Asia, Australia and the Middle East; and Boral USA, a scaled building products and fly ash business with greater geographic reach, more diverse product offerings and strong growth prospects.

Combined, the new Boral USA will be a US$1.8 billion revenue business with significantly improved earnings.

Mike Kane (pictured), Boral’s chief executive officer and managing director, said: ‘Headwaters have a portfolio of strong businesses with recognized brands, quality products, diverse end-market exposures and solid earnings performance.

‘The businesses of Headwaters are highly complementary with Boral’s existing US operations – in fly ash, roofing, stone and light building products – and it’s this strong alignment that means we can deliver substantial value through synergies – ramping up to approximately US$100 million per annum of synergies within four years of closing.’

Mr Kane continued: ‘It’s the synergy opportunities that help make this a highly compelling acquisition, and I am confident that we have the right team in place to bring together the two portfolios, drive integration and deliver strong value creation for Boral’s shareholders.

‘While the acquisition of Headwaters significantly transforms Boral USA, it is also highly transformative for Boral as a Group. We can now be confident in Boral’s position as a global building products and construction materials group with three very strong divisions.’

Kirk A. Benson, chairman and chief executive officer of Headwaters, added: ‘We are looking forward to working with Boral to ensure a smooth transition for our stakeholders, as we create one of the leading manufacturers and distributors of building products and construction materials.’

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