Boral’s move to consider a sale of its US-based fly ash business comes at a time of strong demand for the material and some suspect that the company could use the funds from a divestment to embark on an acquisition in Australia.
The company announced on Thursday that the unit was under review.
On one level, it comes somewhat of a surprise, given that part of its US operations was always the division most thought the company was committed to.
However, expectations are that the company could receive a knockout price for the operation at a time when Boral faces investor pressure to retreat from the US market, where greater infrastructure spending is set to occur.
A sale for a high price could enable Boral to reinvest its proceeds back in Australia, where it could embark on acquisitions, with some suggesting that Queensland-based cement producer Wagners is a logical target, or even the privately held West Australian building material empire BGC, subject to clearance from The Australian Competition & Consumer Commission.
Working on options for the fly ash division, which accounts for over half of its US earnings, is Royal Bank of Canada.
Bank of America is assisting Boral in weighing up whether to sell other parts of the US business, likely to be in one line.
Another factor in the decision to weigh options for the fly ash division (fly ash is used to strengthen concrete) is that it is reliant on coal-fired power stations for its production, making it harder to source.
This is at a time when coal is becoming increasingly out of favour with investors worried about its impact on the environment and it remains on the decline in terms of an energy source internationally.
As a result, its strategy is to look at alternative fly ash supply sources, particularly with respect to harvesting and imports, as flagged in its half-year results in February.
Some of the US heavy materials players may be drawn to Boral’s fly ash operations, such as CRH, Cemex and Holcim, while private equity firms could be buyers.
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