ASX 200 drops, CBA sinks, Boral sells US division

CBA’s share price drop was a lowlight today in the ASX 200.

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The S&P/ASX 200 Index (ASX: XJO) dropped by 1.8% to 7,235 points.

Here are some of the ASX highlights from today:

Commonwealth Bank of Australia (ASX: CBA)

The CBA share price fell around 5.4% today after announcing the sale of its CommInsure general insurance business.

It’s selling this business to Hollard Group, whilst establishing a 15-year strategic alliance with Hollard for the distribution of home and motor vehicle insurance products to CBA’s retail customers in Australia.

The transaction consideration includes $625 million of an upfront consideration, together with deferred payments which are payable upon achieving certain business milestones. Hollard will invest throughout the 15-year strategic alliance to drive innovation and enhance the customer experience.

CBA said it will also continue to earn income on the distribution of home and motor insurance products. A pre-completion dividend is also expected to be received by CBA.

The CBA CEO Matt Comyn said:

The transaction is consistent with CBA’s strategy to deliver differentiated customer propositions and the best integrated digital experiences. CBA and Hollard will co-invest in innovative, market-leading products and services that anticipate and meeting the changing needs of our customers.

This deal is expected to increase its CET1 capital by $400 million, which translates to an increase of 9 basis points of the CET1 capital ratio.

The transaction is estimated to result in a after-tax gain on sale of approximately $90 million.

Boral Limited (ASX: BLD)

The Boral share price went up 1.5% today after announcing the sale of its North American building products business.

It’s selling this division to Westlake Chemical Corporation for US$2.15 billion, or approximately AU$2.9 billion.

The transaction will not result in the payment of any income tax in the US or Australia as a result of carried losses.

This deal will reduce Boral’s net debt target from around $1.5 billion to approximately $1.3 billion. This is in line with Boral’s financial framework, which targets an optimal net debt range.

The board will assess options to distribute surplus capital having regarding to the size of the surplus and the most appropriate method for distributing the surplus capital to shareholders.

Boral CEO and managing director Zlatko Todorcevski said:

Boral has owned and operated building products businesses in the USA for more than 40 years and we recognise and value the contribution that our North American building products’ employees and customers have made to the Boral Group over that time.

The level of market interest and the acquisition price reflects the fact that Boral’s building products is a portfolio of great businesses with quality products, strong brands and good positions in many geographies.

It was one of the few ASX 200 shares to go up more than 1% today.

Bank of Queensland Limited (ASX: BOQ)

The BOQ share price dropped around 5% today after announcing that its acquisition of ME Bank had been approved by the Treasurer of Australia. It was one of the ASX 200 shares that suffered a heavier selloff today. 

BOQ is buying ME Bank for a cash consideration of $1.325 billion. But the deal was waiting for approval from the Treasurer.

George Frazis, managing director and CEO of BOQ, said:

The addition of ME Bank to the BOQ Group will further strengthen our multi-brand strategy, deliver material scale, broadly double the size of our retail bank and provide us with geographic diversification. We look forward to the ME Bank team formally joining the BOQ Group very soon.

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