Materials firm Westlake Chemical Corp. is making a big move into downstream products by acquiring the North American building products business of Boral Industries Inc. for $2.15 billion.
The all-cash deal is expected to close in the second half of 2021, officials with Westlake in Houston said in a June 20 news release. Boral Industries is a unit of Australian construction giant Boral Ltd.
Boral's North American building products businesses include roofing; siding, trim and shutters; decorative stone; and windows. The business employs about 4,600 at 29 sites in the U.S. and Mexico. It had sales of more than $1 billion for the year ending June 30, 2020.
Westlake officials said that the combination of their firm's own building products unit with Boral's product lines "creates a stronger business with significantly increased scale, greater product and geographical diversity, and enhanced growth prospects throughout the North American building products market."
In a presentation to investors, Westlake officials said that the Boral deal will increase its building products’ share of Westlake’s total sales from 28 percent to 37 percent. Boral makes PVC siding, trim and windows, but it also produces nonplastic items such as concrete tile, clay tile, stone-coated metal and decorative stone.
PVC resin makers “have a long history” of integrating downstream into PVC product production, according to Phil Karig, managing director of the Mathelin Bay Associates LLC consulting firm in St. Louis. He said this downstream integration has been focused on the housing sector in general and on the PVC pipe, siding and windows businesses in particular.
“What makes Westlake’s most recent acquisition somewhat unique is that Boral’s North American business is not primarily a pure PVC products play,” Karig added. “With Boral offering a wider range of product offerings, as well as an expanded geographic marketing area to Westlake, this is one acquisition that has the potential to bring more earnings to the bottom line than just reductions in the cost of PVC.”
Westlake's own building products business includes Royal Building Products' siding, trim and moldings; DaVinci composite roofing; NAPCO Pipe and Fittings; and specialty PVC compounding.
"The combination of Boral North America's product lines with Westlake's building products businesses will greatly expand our housing-related building products business and extend our presence in North America," President and CEO Albert Chao said in the release.
Boral CEO and Managing Director Zlatko Todorcevski added that the sale "is expected to unlock significant value for Boral's shareholders."
"Boral has owned and operated building products businesses in the USA for more than 40 years," he added. "We recognize and value the contribution that our North American building products' employees and customers have made to the Boral Group over that time."
Westlake's vinyls unit — including PVC resin, PVC pipes and fittings, and PVC siding and profiles for fencing, decking, windows and doors — reported 2020 sales of a little less than $6.3 billion. The unit accounted for about 75 percent of Westlake's total sales, with the remainder coming from its olefins unit, including polyethylene resin.