Boral (ASX:BLD) share price falls on sale of its US bricks business

The Boral Limited (ASX: BLD) share price lost ground on Friday after it announced the sale of its US joint venture bricks business.

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The Boral Limited (ASX: BLD) share price lost ground on Friday after it announced the sale of its US joint venture bricks business.

The Boral share price tumbled 2% to $4.82 compared to the 1.2% decline in the the S&P/ASX 200 Index (Index:^AXJO) today.

The building products supplier announced in the closing moments of trade that it struck an agreement with its JV partner to sell the Meridian Brick business to Wienerberger for US$250 million.

Boral’s divestment yields small profit

Boral will receive half of the proceeds, which should translate to around a $10 million pre-tax profit for the group.

The divestment is subject to the usual conditions and regulatory approvals, but I don’t see any real impediments to the deal. The transaction should be finalised in FY21.

The sale won’t come as any real surprise. Boral’s current chief executive, Zlatko Todorcevski, is tasked with undoing his predecessor’s disastrous US expansion.

More transactions expected?

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

“The divestment of Meridian is a further step in Boral’s portfolio review works. It helps to streamline our US business and allows us to further focus on the improvement initiatives underway in the remaining businesses in Boral North America.”

Takeover rumours continue to run hot

The Boral share price performed well recently as bargain hunters bought into the stock on turnaround hopes.

Speculation that it’s a takeover target didn’t hurt either as Seven Group Holdings Ltd (ASX: SVW) appeared on its share register.

However, the Boral share price is still lagging the sector. While the BLD share price gained 8% in 2020, which is ahead of the ASX 200’s flat performance, its peers have outperformed.

Boral share price still lagging despite divestments

The James Hardie Industries plc (ASX: JHX) share price surged 35%, while BlueScope Steel Limited (ASX: BSL) share price and CSR Limited (ASX: CSR) share price gained 18% each since January.

However, Boral’s share price rally is likely to extend into 2021. The large pipeline of construction projects over the few years bodes well for the industry.

Besides, with eager bidders lurking in the shadows, the stock is unlikely to tumble by too much even as the post-COVID‐19 recovery is unlikely to be smooth.

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Motley Fool contributor Brendon Lau owns shares of BlueScope Steel Limited, James Hardie Industries plc, and Seven Group Holdings Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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