Boral’s Meridian bricks sale price backed by analysts

Some analysts had questioned whether Boral could have got a better price for its Meridien bricks business.

Analysts at Morgan Stanley believe that Boral achieved a “favourable” price for the sale of its North American-based Meridian Brick business to Wienerberger for $US250 million.

The response from analysts flies in the face of some industry experts who believe that the country’s largest building materials supplier could have achieved a slightly higher price for the division from an industry player if it had run a competitive auction.

Meridian wanted $600m about two years ago when it fielded approaches for the division from industry groups, say sources.

The sale of the Meridian plants in the southern US represents a full exit from bricks for Boral globally.

Since 2016, Boral has owned half of the joint venture with private equity firm Lone Star Funds – a fund that is said to have earlier been running the ruler over Boral – and the transaction will see Boral receive $US125m in proceeds, which is slightly above its book value.

Boral is expected to book a $10m profit on the sale when it’s completed in the new year.

In a research note, Morgan Stanley analysts said the transaction was a further step towards a simplification of the business and a strengthening of the balance sheet under new chief executive Zlatko Todorcevski.

“With the agreed sale of the plasterboard joint venture, this represents two divestments that have achieved agreed sale prices ahead of our valuation,” Morgan Stanley analysts said in their research.

“This bodes well for further potential transactions.”

Boral has indicated that it will test the market for its US building products assets next year, and DataRoom understands that the company is close to offering a formal mandate to an investment bank to handle the transaction.

Most around the market expect that Bank of America will win the mandate.

Morgan Stanley said it was of the view that the company’s balance sheet issues were now resolved.

“Further divestments may open the door to capital management.”

Boral said last week in the announcement about the sale that since it formed the joint venture, its plan was to ultimately prepare the business for sale.

It hired a new chief executive two years ago for the venture, who has focused on lifting its performance.

“The agreed sale represents a fair value for the business and reflects its improved performance,” Boral said at the time.