Gypsum industry news

France: Lafarge has received Euro850m from the sale of its European and South American gypsum assets to Belgium's Etex Group. Lafarge will retain a 20% interest in the new partnership. The new entity created by the acquisition will have an annual revenue of around Euro1bn, according to Etex.

Europe/South America: The Belgian building-material company Etex Group has received approval from the European Commission (EC) to buy the European and South American gypsum activities of French cement group Lafarge for over Euro1bn (USD1.4bn). The EC ruled that the transaction would not significantly impede effective competition.

The activities, which generated Euro895m in revenue for Lafarge in 2010, will be incorporated into a new entity, in which Lafarge will hold a 20% stake. The divestment is in line with Lafarge's strategy to reduce its debt by Euro2bn in 2011.

Vietnam/Indonesia: Lafarge Boral Gypsum Asia, soon to be wholly-owned by Boral, has awarded a new contract to Claudius Peters Projects GmbH Germany for two gypsum calcining lines with a capacity of up to 30t/h to expand its gypsum wallboard production in Asia.

In Vietnam a fully-integrated line will be installed at the site of Lafarge Boral Vietnam Gypsum Co. Ltd near Ho Chi Minh City, extending the capacity of the current wallboard production line. The second line will be installed in Indonesia and will be part of an extension programme of the Cilegon installation of PT Petrojaya Boral Plasterboard.

Both of the lines consist of a Claudius Peters Mill EM59-585 along with the auxiliary equipment and controls of a complete raw material handling, gypsum calcining and cooling system.

Asia: French cement group Lafarge has announced that it has completed the signing of a deal to sell to its Australian peer Boral its stake in their 50/50 gypsum-producing joint venture Lafarge Boral Gypsum Asia (LBGA) for USD619.4m.Thanks to the sale, Lafarge will exceed its target to divest assets worth USD1.08bn in 2011.

The transaction is part of Lafarge's plan to reduce debt and is due to be finalised by the end of 2011. The plan has already seen assets in South America and Europe transferred to Etex and Australian operations sold to Knauf.

LBGA has 2100 employees spread across 20 production sites and registered sales of USD260.8m in 2010. Its earnings before interest, tax, depreciation and amortisation (EBITDA) were USD44.7m in 2010. This latest deal means that Lafarge now only has gypsum assets in North America.

Australia: Lafarge has announced the sale of its Australian gypsum operations to Knauf for net proceeds of Euro120m.

Lafarge's Australian Gypsum business represents two manufacturing facilities for gypsum wallboard and other compounds along with a national network of distribution and retail centres. In 2010, Lafarge's Australian operations generated EBITDA of Euro13m. The completion of this deal is expected to happen in the third quarter of 2011.

This news follows Lafarge's decision to sell its gypsum interests in Europe and South America to the Belgian Etex Group (announced on 14 July 2011 – read full story here). Under this proposed agreement, Lafarge would receive net cash proceeds of approximately Euro850m and in addition would receive a 20% interest in the new partnership. The partnership would combine the European and South American Gypsum activities of both groups.

World: With Boral's recent acquisition of Sunshine Coast Quarries, the company has spent USD250m in Queensland since April 2011. Boral's head of strategy and mergers and acquisitions, Matt Coren, said this move did not necessarily reveal a special focus on the state (or indeed on cement and concrete), saying, "You'll see us continue to invest in other markets."

Boral's recent acquisition spree, along with Coren's comments, has raised speculation that the group may be eyeing up bigger and more lucrative offshore investments. Following the decision by France's Lafarge to sell 80% of its European gypsum assets to Etex Group (announced on 14 July 2011 – read full story here), the spotlight has again swung to the possibility that Boral may be considering the French gypsum and plaster company's Asia-Pacific and North American assets. Boral and Lafarge have an existing joint venture plasterboard business in Asia and it is thought the Australian building group would like to increase its 50% stake or even buy out its partner entirely.

Credit Suisse has indeed recently labeled Boral as the 'natural owner' of Lafarge's remaining gypsum assets. Rohan Gallagher, an analyst with Credit Suisse said that Boral would need to raise equity to do the deal, but expressed doubt that facilities in the United States and Mexico (including six wallboard plants with over 300Mm2/yr wallboard capacity), would not be a wise choice for Boral in the present climate.

Nomura analyst Simon Thackray said that if Boral could increase its stake in the Asian joint venture by a further 10% and purchase a 60% interest in Lafarge's US business the group would need to spend about USD300m, which could be heavily dilutive.

World: In the first major gypsum deal since the onset of the recession on 14 July 2011 Lafarge announced that is would sell its gypsum interests in Europe and South America to the Belgian Etex Group, its current joint-venture partner in South America.

Under the proposed agreement, Lafarge would receive net cash proceeds of approximately Euro850m and in addition would receive a 20% interest in the new partnership. The partnership would combine the European and South American Gypsum activities of both groups.

Lafarge's European and South American Gypsum division manufactures gypsum wallboard and other gypsum-based products such as plaster, joint compounds and plaster blocks. In 2010 the European and South American operations generated combined sales of Euro895m and their combined earnings before interest, tax, depreciation and amortisation were Euro115m. The group's other gypsum interests, including its joint-ventures in Asia with Boral, represent sales of around Euro500m/yr.

The deal will have to receive the approval of the relevant anti-trust authorities and the group will also conduct an information and consultation process with the relevant employee representative bodies.

Above: Summary of Lafarge wallboard assets 2010. The Global Gypsum Directory 2010 lists 45 Lafarge wallboard plants across 30 countries, with a total capacity of approximately 1.3BnM²/yr in 2009-10. Nearly 8000 people are directly employed by the unit. Key: Number of plants (Capacity in MM²/yr).

In a conference call, Bruno Lafont, Chairman and CEO of Lafarge said that Lafarge's gypsum interests represented a modest 9% of its sales in 2010 and that the sale was consistent with Lafarge's plan to focus on its core activities, which he listed as cement, concrete and aggregates. He highlighed the group's focus on providing building materials to rapidly-growing, developing markets with fast population growth rates and a need for new housing and infrastructure development.

He stressed that Lafarge would keep a 20% in the new joint-venture, which he expected to contribute positively to the group's balance sheet and was in line with the best interests of its shareholders.

Lafont summarised the assets in the deal, stating that all of the European interests held by Lafarge in France, the UK, Germany, Italy, Poland, Romania and the Netherlands represented around 60 industrial sites and that the move would affect approximately 3300 employees. In Lafarge's native France, the move affects four wallboard plants, seven associated plants that make jointing compounds and metal studs, five gypsum quarries and a total of 1400 employees.

In South America, the move affects four countries, namely Brazil, Argentina, Chile and Colombia. In these countries, Lafarge and Etex have been engaged in a joint-venture project dating back several years.

Lafont added that despite it being a small component of its operations, Lafarge currently has gypsum interests on all continents and will, for the meantime, be keeping hold of those in Asia, Australasia, Africa and North America. He said that keeping a 20% stake in its existing interests in the affected areas would allow it to, "benefit from the upturn when it comes." He said that it was appropriate for the group to 'keep a link' to gypsum, adding that Lafarge has the right to sell its 20% interest after five years.

He also said that the transaction would help Lafarge improve its relationship with existing partner Etex and allow both groups to expand the positive relationship that has been developed in South America throughout their newly-combined European operations. Lafont commented that the two groups shared the same values and a similar management style.

Speaking personally, he said that he was pleased to announce the deal and concluded that it was a positive move for Lafarge through maintaining its 20% stake, Etex and the shareholders of both groups.

In a statement issued by Lafarge before the conference call Lafont said, " This project unlocks immediate value for the Group while allowing Lafarge to participate in the new entity's future success. We are very pleased with the future prospects of this reinforced partnership with Etex Group, a strong industrial company with expertise in building materials and systems. This operation is positive for Lafarge and its shareholders and will contribute to the strengthening of the group's balance sheet and to the optimisation of its portfolio."

France: Lafarge's Olivier Guilluy has said that the company will not decide on a winning bid for its gypsum unit before September 2011. The business, reportedly valued at around Euro800m, has attracted around 10 serious bids from a variety of established gypsum wallboard producers and new players.

"In principle there will be no decision before the back-to-school season (in September)," said Guilluy. "A price has not yet been set for the division." In June 2010, local press reported that private equity funds, including Kohlberg Kravis Roberts & Co. and Carlyle, were in the running alongside industrial buyers including US-based Eagle Materials.Sources close to the situation have said the gypsum unit may be sold by geographic zone, split into Europe, North America and Asia, depending on whether antitrust rules complicate the sale or not.

Despite the high level of interest, Guilluy added that Lafarge may yet scrap the sale, depending on a decision to be made by its CEO Bruno Lafont. Guilluy said, "The unit generated about 9% of group sales in 2010, with revenue of Euro1.4bn and a current operating profit of Euro58m."

France: Lafarge has chosen a handful of bids, including those of investment funds Cinven and Bain Capital, for its plaster unit Lafarge Gypsum, from at least 10 different offers. Belgian building material group Etex is also reportedly still in the race, while Advent, Carlyle and TPG have been ruled out.

Other offers were reportedly made by Kohlberg Kravis Roberts & Co. Eagle Materials Inc., USG Corp and Saudi Arabia's National Gypsum Company. The bids are around Euro900m on average.

Lafarge Gypsum's operating profit jumped 80% on the year in the first quarter to Euro18m, while its sales rose by 9% to Euro375m. The US activity, however, struggled with a loss in 2010. It is not known whether or not the assets will be split up geographically, as had previously been suggested.