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France's Saint-Gobain to buy U.S. firm Continental Building Products for $1.4 billion

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By Reuters
France's Saint-Gobain to buy U.S. firm Continental Building Products for $1.4 billion
FILE PHOTO: FILE PICTURE: The Saint-Gobain logo is seen on top of the company's headquarters building at the La Defense business district, Paris, May 14, 2018. REUTERS/Charles Platiau/File Photo   -   Copyright  Charles Platiau(Reuters)

By Sudip Kar-Gupta and Dominic Roshan KL

PARIS (Reuters) – French construction material producer Saint-Gobain <SGOB.PA> has agreed to buy U.S. company Continental Building Products Inc <CBPX.N> in a deal valued at $1.4 billion (1.1 billion pounds), which Saint-Gobain said would boost its earnings and profile in the U.S. market.

Saint-Gobain will pay $37 per share in cash, representing a 3.5% premium to Continental’s closing share price on Tuesday. The transaction was announced by both companies late on Tuesday.

Continental, which makes gypsum wallboards, will be merged into a newly formed unit of Saint-Gobain. The deal has been approved by both companies’ boards and is subject to approval by Continental stockholders and antitrust regulators.

Saint-Gobain said the U.S. company is expected to have 2019 revenue of around $510 million and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of around $130 million.

It said the acquisition would create an opportunity for around $50 million in terms of cost synergies by the end of the third year following the formal closing of the transaction.

The French company said it would finance the takeover via proceeds from sales of other non-core parts of its business.

Saint-Gobain’s Chairman and Chief Executive Officer Pierre-Andre de Chalendar described the acquisition as “a unique opportunity allowing Saint-Gobain to move to the forefront of plasterboard and construction solutions in North America.”

De Chalendar also told reporters on a conference call on Wednesday that Saint-Gobain would continue to examine further takeover opportunities next year, as the French company pursues a strategy it calls ‘Transform & Grow’, aimed at boosting its results and returns for shareholders.

U.S. bank Citi was the financial adviser to Continental and while Gibson, Dunn & Crutcher LLP was the legal counsel.

Investment banks Lazard and Morgan Stanley advised Saint-Gobain, while Cleary Gottlieb Steen & Hamilton was Saint-Gobain’s legal counsel.

(Reporting by Dominic Roshan K.L. in Bengaluru; Editing by Amy Caren Daniel and Kenneth Maxwell)