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Boral Limited sells US concrete asset to reduce debt

Shares in Boral Limited (ASX: BLD) were 1.7% up to $6.61 on Thursday, after the construction materials company announced the sale of its US concrete and quarries business to Brannan Sand and Gravel for US$127 million (circa AU$170 million).

The sale price implies a trailing EV/EBITDA multiple of between 8 and 9. CEO Mike Kane explained that while the business has performed well, it was the right time to realise value by selling a non-core asset. In the first half of FY18, the US concrete and quarries business contributed US$52 million, or just around 5%, to Boral North America’s revenue.

Following the acquisition of Headwaters for US$2.6 billion last year, Boral North America accounts for about one third of the group’s revenue. The division’s core businesses are fly ash, roofing and manufactured stone.

Boral will use sale proceeds to improve its financial position. The company had AU$2.4 billion net debt at December 31, with gearing of 30%.

The transaction is expected to be completed on May 31, subject to customary completion adjustments and regulatory approvals, and will result in a pre-tax profit of around US$45 million, which will be reported as a significant item in FY18.

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