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Westlake expanding building products division with $2.1 billion deal

Highlights

Westlake to acquire Boral's North American division

Deal expands Westlake's US footprint, offerings

Westlake Chemical is expanding its building products US footprint with its $2.1 billion acquisition of Australia-based Boral Ltd's North American division, CEO Albert Chao said June 21.

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"We believe in the growing secular trends of the housing and repair and remodeling markets and see the strategic acquisition of this business providing new product platforms and long-term growth opportunities for Westlake," he told analysts during a call about the deal announced June 20.

Expected to close in the second half of 2021, the deal will turn Westlake's building products segment into the biggest chunk of the company.

Currently, Westlake's building products segment makes up 28% of the total, with chlor-alkali and European PVC 34%, US polyvinyl chloride 18% and olefins, which includes polyethylene, at 21%.

After the deal closes, the building products segment will grow to 37% of the company, while chlor-alkali and European PVC shrinks to 30%, US PVC 16.5% and olefins 18%, Westlake said in a presentation.

In addition, the deal will widen Westlake's building products offerings. The company now offers PVC pipe, vinyl siding, trim and molding, composite roofing and other compounds.

Boral's addition will expand those offerings to include windows, stone, concrete and clay roofing, and known brands of roofing, siding, trim and shutters.

"This transaction furthers our integration strategy, while the growing structural demand for housing, along with ongoing repair and remodeling activity to existing homes enhances our margin stability," Chao said.

He also said Westlake was continuing to scope out possible debottlenecking opportunities across its businesses to increase petrochemical output. Expanding the building products segment is another growth initiative as well.

"Housing, as you know, is one of the largest locomotive engines that drive the US economy, and we'll be participating in it through our PVC business as well as our downstream building business for decades," Chao said.

CFO Steve Bender added that Boral's North American division has manufacturing plants concentrated in the west and southwest regions of the US, while Westlake's facilities are more concentrated in the central, northeast and southeast regions.

"This provides us with the ability to really cover the markets from the East Coast to the West Coast," Bender said.