CSR Ltd., Australia“s top sugar producer and building products maker, said on 29 June 2007 that it had agreed to buy Pilkington Australasia from Japan“s Nippon Sheet Glass for AUD 690 million (USD 5…
CSR Ltd., Australia“s top sugar producer and building products maker, said on 29 June 2007 that it had agreed to buy Pilkington Australasia from Japan“s Nippon Sheet Glass for AUD 690 million (USD 585 million). Pilkington Australasia produces about 215,000 tonnes of float glass and rolled glass a year from three plants located at Dandenong in Victoria state and Ingleburn and Alexandria in New South Wales. Not everyone has been convinced by the deal with some investors believing that CSR has overpaid for the asset. UBS had estimated a fair price to be around AUD 452 million for a business whose revenue is forecast to grow by 7.5% in fiscal 2008 to AUD 430 million. “Whilst this acquisition complements CSR“s building products activities, the initial debt funding of these glass operations will weaken the company“s financial profile”, Standard & Poor“s said in a report. The acquisition would be earnings per share neutral in fiscal 2008, and would start adding to CSR“s profits from the following year, excluding one-off costs. S&P, which placed CSR“s debt on credit watch with negative implications, said CSR“s debt-to-equity ratio would increase to 49% from 31% following the acquisition, which the company plans to wholly fund with debt. S&P added that the deal would further boost CSR“s market position as a leading producer of building products and enhance CSR“s diversity across its business segments. The deal would lift CSR“s revenue from its building materials division to about 39% of the total revenue from about 31% at present. CSR“s acquisition price represents an earnings before interest, tax, depreciation and amortisation (EBITDA) multiple of 7.9 for fiscal 2008. NSG bought the entire business of UK glassmaker Pilkington for around USD 3 billion in early 2006. Nippon Sheet Glass trades at a price-earnings ratio of 24 times compared with 30.34 for Asahi Glass. “The acquisition is strategically and financially compelling for CSR, is consistent with CSR“s stated growth strategy and is an excellent fit with CSR Building Products”, CSR said. CSR expects cost benefits of at least AUD 20 million per annum by 2010, with about half to be achieved in fiscal 2008. Goldman Sachs JBWere and Gilbert and Tobin advised CSR on the deal.