Boral Ltd., Australia's largest building and construction material supplier, will buy U.S.-based Headwaters Inc. for US$1.86 billion cash in a deal aimed at bolstering its light building products platform and taking advantage of President-elect Donald Trump's call for increased infrastructure spending.
Based in South Jordan, Utah, Headwaters sells a variety of plastic building materials under different brand names, including vinyl siding (Foundry), cellular PVC trim (Kleer Lumber) and decking (Clubhouse), composite wood shutters (Atlantic) and polymer-composite roofing products (Enviroshake) in addition to stone and block products. The primary focus of its construction materials business is recycling fly ash from coal-burning power plants into a substitute for cement suitable for roads, bridges and highways.
Sydney-based Boral has a U.S. division in Atlanta, called Boral USA, that manufactures mostly clay bricks and roof tiles, concrete and stone veneer.
“The businesses of Headwaters are highly complementary with Boral's existing U.S. operations and the transaction price reflects our belief that there is strong commercial rationale for combining the two portfolios,” Boral CEO and Managing Director Mike Kane said in a Nov. 20 news release.
The acquisition positions Boral to deliver sustainable growth in a U.S. housing market experiencing positive momentum and “will play favorably into the infrastructure spend underway in the USA,” the 78-page release also says.
Headwaters Chairman and CEO Kirk Benson said the combined companies will deliver a premier selection of products to customers.
“We are looking forward to working with Boral to ensure a smooth transition for our stakeholders as we create one of the leading suppliers of building products and construction materials for infrastructure, new residential, repair and remodel, commercial and institutional construction,” Benson said in the release.
The deal delivers significant value to Headwaters' shareholders, he added. They still have to approve the plan along with regulatory agencies. Boral will acquire Headwaters for US$24.25 per share, which represents an aggregate enterprise value of about US$2.6 billion. The offer price represents a 21 percent premium to Headwaters' closing stock price of Nov. 18 and a 34 percent premium over the 30-day volume-weighted average closing price through Nov. 18.
Boral, also a publicly traded company, had sales of A$4.3 billion (US$3.16 billion) for the year ending June 30, 2016.
Headwaters ended its 2016 fiscal year on Sept. 30 with sales up 9 percent to $975 million and gross profit up 7 percent to $288.2 million, according to its Nov. 1 news release on 2016 financial results.
The acquisition has been approved by the boards of both companies and is scheduled to be completed in mid-2017.