Basic chemicals, vinyls, polymers, and building products manufacturer Westlake Chemical Corporation (WLK) has agreed to acquire Boral Limited’s (BOALF) North American building products businesses in a $2.15 billion cash deal. The acquisition is expected to close in H2 2021.
The acquisition includes Boral’s roofing, decorative stone, and windows products businesses and almost doubles the size of Westlake’s building products business.
Westlake President and CEO Albert Chao said, “The combination of Boral North America’s product lines with Westlake’s building products businesses will greatly expand our housing-related building products business and extend our presence in North America.” (See Westlake Chemical stock chart on TipRanks)
This transaction brings increased scale, product and geographical diversification, and better growth prospects for the company in the North American building products market. Westlake estimates yearly cost synergies of about $35 million and expects the acquisition to be accretive to its bottom line in the first year of operations. The acquired businesses garnered revenue of over $1 billion in the Fiscal year ended June 2020.
On June 11, J.P. Morgan analyst Jeffrey Zekauskas reiterated a Buy rating on the stock and increased the price target to $134 (46.8% upside potential) from $98.
Zekauskas sees resilient prices in chlorine and polyvinyl chloride owing to lower interest rates, positive demographic trends in the housing market, and slower capacity increase in the global vinyls chain.
Consensus on the Street is a Moderate Buy based on 5 Buys and 6 Holds. The WLK average analyst price target of $114.45 implies 25.3% upside potential. Shares have surged 66.3% over the past year.