The Boral Limited (ASX: BLD) share price is in the spotlight as expectations for a big capital return just increased.
The building products supplier announced this morning that it signed an agreement to sell its US fly ash business for US$755 million (~$1 billion).
The Boral share price jumped 1% to $6.23 in early trade when the S&P/ASX 200 Index (Index:^AXJO) fell 0.2%.
Boral share price has a silver lining
The sale to Eco Material Technologies marks a bittersweet conclusion of Boral’s US expansion story. It’s foray into the US market under previous chief executive Mike King has cost shareholders dearly.
Boral paid $3.5 billion for the Headwaters fly ash and building products group over five years ago.
But there’s no point crying over spilt fly ash. King is long gone, the Boral share price is recovering and shareholders should be able to look forward to enjoying a capital return in the new year, funded from the proceeds of asset sales.
Asset sales and surplus cash
Boral’s current chief executive Zlatko Todorcevski has been busy divesting underperforming assets to revive the Boral share price. This included the sale of its 50% holding in USG Boral for US$1.02 billion, Meridian Brick for US$250 million and US building products business for US$2.15 billion – just to name a few.
The sale of the fly ash business is the last piece in the jigsaw that will see Boral focus on its Australian construction materials business. The deal is scheduled to be completed in the current financial year.
The expectation here is that Boral will have surplus cash from its downsizing exercise to fund a $1bn plus capital return – if not more.
Boral’s capital return in focus for 2022
“For Boral’s shareholders, we have now unlocked substantial value through a successful divestment program,” said Todorcevski.
“Together with the sale of the North American Building Products business and our stake in Meridian Brick, following finalisation of this transaction, we will have divested the North American businesses for more than A$4 billion (US$3 billion).”
Boral’s board is yet to determine how to return the surplus cash to shareholders. This could come as another on-market share buy-back, like the one it just completed in July this year following the sale of USG Boral.
But you can’t rule out other capital management initiatives either, such as a special dividend.
Boral share price ending year on a high note
Despite the many issues, at least the Boral share price is heading in the right direction. Its shares have gained around 25% over the past year, thanks in no small part to the takeover offer by Seven Group Holdings Ltd (ASX: SVW).
In contrast, the Seven Group share price has fallen early 7% when the ASX 200 is largely flat over the same period.