USG Paying Boral Up to $575 Million to Form New Joint Unit

USG Corp., whose largest investor is Warren Buffett’s Berkshire Hathaway Inc., agreed to pay Boral Ltd. as much as $575 million to create a jointly owned building materials business spanning Asia and the Middle East.

Boral shares surged the most in nine months after Chicago-based USG said it will contribute its Asian and Middle Eastern units and offer exclusive access to products such as ceilings and plasterboard. Sydney-based Boral will inject its gypsum unit into the venture, the companies said in a statement today.

Boral will use USG’s payment to cut debt after posting the company’s first annual loss since 2010. The new business, which may allow USG to cut reliance on North America, will have assets valued at $1.6 billion and sell products in 12 nations including Boral’s largest market, Australia, the companies said.

“We have long been focused on our strategic plan to diversify our earnings and differentiate our business through innovation,” USG Chairman and Chief Executive Officer Jim Metcalf said in the statement.

Boral jumped 5.9 percent to A$5.03, the steepest gain since Jan. 16, at the close in Sydney. USG closed in New York before the pact was announced and fell 6.1 percent in late U.S. trades.

Under the terms of the agreement, USG will pay Boral $500 million in cash when the deal is completed -- scheduled for January 2014 -- and as much as $75 million if the venture, named USG Boral Building Products, meets certain earnings targets.

Berkshire Hathaway has a 15.7 percent stake in USG, according to data compiled by Bloomberg.

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