Is Brickworks keen on Knauf assets?

The country’s largest brick manufacturer, Brickworks, is understood to have approached German plasterboard manufacturer Knauf to buy its Australian assets.

The country’s largest brick manufacturer, Brickworks, is understood to have approached German plasterboard manufacturer Knauf to buy its Australian assets before they were officially placed on the market, as activity in the building material remains in focus.

It comes as investment bankers from Macquarie Capital are said to have been sounding out private equity firms in the US to test their appetite for Boral’s North American arm.

Knauf is understood to have fielded approaches to buy its Australian assets from two strategic groups before running a beauty parade to find an adviser.

Bank of America won the role and is now working on a sale for some of Knauf’s plasterboard factories, with hopes of securing about $400m for the German family-owned operations.

However, it is thought buyers are more interested in a price closer to $300m, while private equity firms could offer less, deterred by it being the No 3 market player.

The assets on offer are said to generate annual earnings before interest, tax, depreciation and amortisation of less than $40m. While the identity of the other strategic suitor for Knauf remains unknown, some believe it may be Fletcher Building.

However, the Auckland-based, Australian-listed group is said to be gun-shy when it comes to corporate activity, given it is battling COVID-19-related headwinds and lacks investor backing for acquisitions.

Unlike CSR, which is one of the largest providers of plasterboard in Australia, Brickworks is unlikely to face any major regulatory opposition when it comes to buying the manufacturing plants.

On offer are believed to be the sites that Knauf owned before it gained an interest in plasterboard plants that USG jointly owned with Boral.

This is along with its ceilings business, which is only a small part of the portfolio.

Like Boral, Brickworks expanded into the US market in recent years, outlaying $US110m for Glen-Gery, the fourth-largest brick maker there.

Boral’s US market expansion, with its $3.5bn acquisition of Headwaters in 2016, has not been warmly received by investors, who are leaning on CEO Zlatko Todorcevski to either demerge or sell parts of the operation.

Some question whether private equity interest exists at a strong price for the assets like its windows division, saying that a buyer would possibly want to own the North American business in one line.

Last year, US-based Lone Star Funds was said to have been circling Boral, in which Seven Group now has a 16.31 per stake after lifting its interest in recent days from 12.19 per cent.

A demerger is another option under consideration by advisers Macquarie Capital and Flagstaff.