Boral bets on US market with acquisition

Australian building materials giant Boral has entered into a binding agreement to acquire US firm Headwaters Incorporated (HW).

HW, a leading manufacturer of building products for the residential and commercial construction industries, is also one of the largest marketers of fly as in the US.

Boral’s offer of US$ 24.25 per share, equates to a total cash transaction of around US$ 1.8 billion, with the total enterprise value being placed at US$ 2.6 billion.

The buyout will give Boral access to the US residential and commercial construction market, reducing the firm’s exposure to the Australian market, which is now seeing a significant slowdown in residential construction.

The acquisition is expected to shift Boral’s revenue split, down from 67% from the domestic market, to around 51%, with US revenues rising from 19% of Boral’s total to around 38%.

While the US economy is demonstrating strong growth potential, there is clearly an element of gambling in the acquisition, given the fact that Donald Trump is yet to move into presidential office. This may explain why news of the acquisition has not so far made a huge positive impact on Boral’s shares.