Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Boral North America Proposed Acquisition Conference Call. During the presentation, all participants will be in listen-only mode. After the speakers' remarks, you will be invited to participate in a question-and-answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, June 21st, 2021. I would now like to turn the call over to today's host, Jeff Holy, Westlake Vice President and Treasurer. Sir, you may begin.
Thank you, Justin. Good morning, everyone, and welcome to the Westlake Chemical Corporation Boral North America Proposed Acquisition Conference Call. I'm joined today by Albert Chao, our President and CEO, Steve Bender, our Executive Vice President and Chief Financial Officer, and other members of our management team. During this call, we refer to ourselves as Westlake Chemical. Any reference to Boral North America is to Boral North America Building Products. Today, management is going to discuss certain topics that will contain forward-looking information that is based on management's beliefs as well as assumptions made by and information currently available to management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties.
Actual results could differ materially based upon many factors, including the timing to consummate the proposed transaction, the conditions to closing of the proposed transaction may not be satisfied, or the closing of the proposed transaction otherwise does not occur, the diversion of management time on transaction-related issues, ultimate timing, outcome, and results of integrating Boral's operations, and the ultimate outcome of Westlake's operating efficiencies applied to Boral's products and services, the effects of the proposed transaction, including the combined company's future financial condition, results of operations, strategy and plans, expected synergies and other benefits from the proposed transaction and the ability of Westlake to realize such synergies and other benefits, results of litigation, settlements, and investigations and other risk factors as discussed in our SEC filings. Yesterday, Westlake issued a press release announcing the proposed acquisition.
This document is available in the press release section of our webpage at westlake.com. We have also posted a presentation on our website that will provide further details. A replay of today's call will be available beginning today, two hours following the conclusion of this call. This replay may be accessed by dialing the following numbers. Domestic callers should dial 855-859-2056. International callers may access the replay at 404-537-3406. The access code for both numbers is 2963369. Please note that information reported on this call speaks only as of today, June 21st, 2021, and therefore you're advised that time-sensitive information may no longer be accurate at the time of any replay. I would finally advise you that this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at westlake.com. Now, I would like to turn the call over to Albert Chao.
Albert?
Thank you, Jeff. Good morning, everyone. We appreciate you joining us to discuss our proposed acquisition of Boral North America's Building Products business. I would also like to extend a special welcome to our soon-to-be colleagues at Boral North America. Today is an exciting day. Westlake has entered into agreement with Boral Industries Inc., a wholly-owned subsidiary of Boral Limited, to acquire Boral's North America Building Products businesses, which includes their leading positions in concrete and clay roofing, premium siding, trim and shutters, decorative stone, and windows. These products improve the energy efficiency, durability, and comfort to residential housing, schools, and hospitals, providing affordable value and desirable enhancements to the everyday lives of countless individuals. This is part of our commitment to building a more sustainable future.
This transaction is expected to be completed in the second half of 2021 and, when combined with Westlake's leading building products in PVC siding, trim and molding, pipes and fittings, specialty PVC compounds, and composite roofing businesses, we expect Boral's North America Building Products business to bring us significant strategic value. We believe in the growing secular strength of the housing and repair and remodeling markets and see the strategic acquisition of this business providing new product platforms and long-term growth opportunities for Westlake. This transaction also complements the growth initiatives we have undertaken for many years in our building products business, including organic extensions of our pipe and fittings business and siding, trim, and molding products. In addition to the 2019 acquisition of NAKAN, the specialty PVC compounding business, and DaVinci, the premium composite roofing business.
In addition to the new and attractive growth avenues for Westlake, this transaction furthers our integration strategy. While the growing structural demand for housing, along with ongoing repair and remodeling activity to existing homes enhances our margin stability. The acquisition of Boral North America increases our breadth in the building products market with well-established and high-quality architectural solutions and premium products brands in roofing, siding, trim and shutter, decorative stone, and windows, which complement our existing products. Through the complementary transaction, Westlake adds significant scale, expanded geographic delivery capability, and product diversifications to create a leading building products business. The combined revenues of our newly expanded building products business and our North American PVC resin business will now represent approximately 53% of our total sales. Therefore, Westlake is well-positioned to continue to benefit from housing, repair and remodeling, and infrastructure spending.
We believe that this combination will create a building product segment of Westlake that's comparable in size and scale to many of the large standalone public peers. Boral North America currently operates 29 facilities across the United States and Mexico, and with salesforce in Canada and the United Kingdom. We look forward to welcoming Boral's 4,600 employees into the Westlake family. I will now make a turn on our call with Steve to provide more detail on the financial aspects of this transaction.
Thank you, Albert, and good morning, everyone. As Albert stated, we are excited about the acquisition of Boral North America's building products business, which will enhance our position as a leading provider of building products to the growing housing and repair and remodeling markets. We expect to fund this $2.15 billion transaction with at least $1 billion of cash on hand and fund the remaining balance by accessing the debt capital markets while maintaining a strong investment-grade credit metrics post-acquisition. Subject to regulatory approvals, we expect to close this transaction in the second half of this year. The financial drivers for this acquisition are compelling. As of the year ended June 30, 2020, Boral North America Building Products businesses had revenues of $1.1 billion, with operations across North America.
The leading market position of many of their products, along with the size, scale, and scope of their operations, when combined with Westlake's existing building products businesses, will drive expected annual cost synergies of approximately $35 million per year. We also foresee the existing distribution channels of the combined businesses adding additional value to new growth opportunities across all product lines. We expect this transaction to be accretive in the first full year of operations. Through the addition of Boral North America's building products businesses, we significantly increase the portion of Westlake's earnings and cash flows attributable to this higher value building products business. These businesses provide material to the house construction and infrastructure markets and consistently trade at premium multiples relative to chemical companies because of the enhanced margin stability. We believe this transaction will create a value uplift for Westlake shareholders.
Thank you for taking time to join us today, and we look forward to providing you updates on the transaction in our quarterly conference calls. With that, I'll now turn the call back over to Jeff. Jeff?
Thank you, Steve. Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available two hours after the call has ended. We'll provide that number again at the end of the call. Justin, we'll now take questions.
And thank you. To ask a question during the session, you'll need to press star one your telephone if you inquire. As a reminder, after the question, you'll need to press star one on your telephone to withdraw your question, press the pound key. Please standby, we'll compile the Q&A roster. Our first question comes from Kevin McCarthy from Vertical Research. Your line is now open.
Good morning, and congratulations on the transaction. Will you comment on the amount of PVC resin that is consumed by the various businesses that you intend to acquire?
Yes. This business has a requirement for PVC as well as requirements for other raw materials mentioned, from concrete and clay. We'll be providing some PVC in the future, but there's other materials that also be used.
Okay. Just to follow up on that, Albert, I think today you're about 50% integrated downstream, which is to say that roughly half of your PVC resin goes into fabricated products. How will that number change post-deal? Can you comment on any existing business relationship with Boral through supply of PVC resin and the contracts that are in place? Thanks.
Yes. We don't have much of a business relationship with Boral today, but we intend to have more integration going forward. Our integration downstream, we are also expanding our downstream building product capacity, so we'll be using more of that future internally.
Okay. Thank you.
You're welcome.
Thank you. Our next question comes from Frank Mitsch from Fermium Research. Your line is now open
Thank you. Also let me offer my congratulations on the transaction. I was wondering if we could delve a little bit deeper into the synergy side of things. You said on the cost synergy side, you anticipate reaching an annual average of $35 million. When do you anticipate that to be realized, and how should we think about the pace of the synergies over the first couple of years?
Frank, when you think about the synergies at the $35 million, we certainly expect to begin to work on those as soon as we close the transaction. As I said, we'll start seeing the benefit of those in the first full year of the business combined operations. Obviously there'll be a ramp up, I expect that we'll begin to get a significant portion of that in the first full year. It will be accretive in the first full year. These will be activities that we think will put a tremendous amount of focus on, and I'm very optimistic in terms of our view to get those early on.
I see. Okay. You expect a significant portion in year one. If I could ask about the sales synergies. You are getting into products that you're not currently in today. I guess this is providing more of a one stop shop and also geographic expansion for you. How should we think about sales synergies coming from this transaction?
Frank, we quantify those that are cost related, and we haven't quantified those that are revenue because we know that there'll be opportunities for cross selling. From a geographic perspective, it's a very nice mix between their geography and their footprint and Westlake's footprint. We're very excited about the opportunity for the cross selling opportunities that we see for that revenue growth. You're right, we haven't talked about that, and we'll talk more about that once we get post-close.
Gotcha. Thanks so much.
You're welcome.
Thank you. Our next question comes from Angel Castillo from Morgan Stanley. Your line is now open.
I think you answered my question, and again, congratulations on the deal. I was just wondering if you could give us a little bit more detail on the margins of maybe the EBITDA of the existing building product portfolio and what that will be pro forma as you bring the two businesses together, again, from an absolute EBITDA and margin perspective.
Yeah. Angel, when you think about that from a multiple perspective, it's between 10x and 11x on a multiple basis. When you think about the EBITDA margins, it's mid to high teens. We've been very pleased with the portfolio and how it has historically performed, and we expect to continue to see continued improvement because of the opportunities to put these two businesses of ours, theirs and ours together to really offer a much broader portfolio offering to the customer base out there. We're very excited about the opportunities to see a more broader base of offerings to the entire customer base.
Got it. That's helpful. Any sense for, I guess the legacy business and how that compares? I think in the past you talked about potential to break that business out into its own and give more clarity as a standalone. I am just curious, is that where we might head in the future and any potential focus splitting out the business standalone company, as you mentioned, it's gained scale compared to competitors and the ability to get the right valuation for that.
Yeah. Certainly appreciate the question. Certainly with the significant expansion of the overall building products businesses of Westlake, we certainly believe this transparency in this business really merits much more visibility because we think of the significant higher value that this provides. You can expect that we'll give a lot more transparency over time.
Got it. Thank you.
Thank you. Our next question comes from Michael Leithead from Barclays. Your line is now open.
Great. Thanks. Good morning, guys.
Good morning, Mike.
First question on the acquired Stone business. It's a bit outside of what Westlake has historically operated. It's an area of the BNA portfolio that Boral had historically struggled with, share loss and other issues. Can you just talk about your confidence in improving this business, or is this something that perhaps you may not want to keep long- term?
Yes. Certainly, the Boral North America has a long history of decades of experience in this area, we are welcoming many of the talented management with long experience coming with it. We also see a lot of commonalities, common markets, common sales channels, and complementary in distribution areas. We believe that today we have about $2 billion of building products revenues already in these areas. We have a lot of expertise, our people also have a lot of expertise in these areas, including Boral North America's businesses. We're looking forward to welcoming the new management team from Boral as well as integrating into Westlake team and to add value from the combined efforts.
Great. Thank you. Steve, maybe just a housekeeping. As we layer this acquisition into our models, should we anticipate any material step up in amortization, tax, or any other impact as we're trying to walk from EBITDA to EPS or free cash flow?
Yeah, certainly. Obviously, we'll have an increase in depreciation as we bring the PPE onto the balance sheet. As we get into our purchase price adjustment of allocating some of that purchase price to the legacy depreciation, there'll be a step up. We'll give more transparency. I've got to get to a close, but we'll give you some better sense of that as we go forward. If you take a look at Boral North America's public financial statements, you'll get some sense of that, and we'll give you more clarity as we get further down the road.
Okay. Thanks.
You're welcome.
Thank you. Our next question comes from P.J. Juvekar from Citi.
Yes. Hi, good morning. Albert, is this sort of a new direction for you? Because some of these products, like concrete and clay roofing or decorative stone, they don't necessarily represent going downstream. Are you trying to become, in the future, more of a housing products company that's less cyclical? Is that sort of the goal that you're working towards now?
I think it's a combination. Housing, as you know, is one of the largest locomotive engine that drives the U.S. economy, and we've been participating through our PVC business and through our downstream building business for decades. Recent acquisitions that we mentioned, NAKAN, specialty PVC compound, and DaVinci, specialty roofing, and back in 2013, we bought certain specialty PVC pipe. All that goes a large part into housing market and infrastructure building as well. This is an area that we want to grow, as well as in our chemicals, specialty chemical business that are doing very well. As I mentioned that we are looking at consolidative opportunities all across our businesses.
Great. Thank you.
You're welcome.
Thank you. Our next question comes from David Begleiter from Deutsche Bank. Your line is now open.
Thank you. Good morning. Congrats on the acquisition. Going back to a prior question, Albert Chao, just on the valuation gap between chemical companies and building products companies. After splitting out this new entity completely, how do you hope to close that valuation gap with investors going forward?
David, as I said earlier, we see the building products businesses, and you pointed out some of the valuation differentials between chemicals and building products. I do agree that we need to give more transparency so that you can see this combination of Boral and Westlake's building products businesses. To give that more transparency, I think is important so that the right kind of valuation can be assigned. As Albert noted, if you look at our 2020 full year sales for our building products businesses, we had over $2 billion of revenue in 2020. As we think about combining that with Boral's numbers, as you can see, we expect to be well over $3 billion in sales, a significant component of Westlake's consolidated numbers.
Certainly, as we think about giving more clarity, that will certainly be a focus to make sure that you and others can get real good visibility on the contribution to the bottom line of this business.
Very good. Just to confirm, Steve, this is the entirety of the Boral North American business reported in Boral's income releases and income statements?
No, David, there is a piece of that is attributable to their fly ash business, which is not part of this transaction. They also had a brick business, which is not part of this transaction, and the residual is the building products business that we are acquiring as part of this transaction. That's the larger share of their North American business.
Thank you very much.
Thank you. Our next question comes from Hassan Ahmed from Alembic Global Advisors.
Morning, Albert.
Your line is open.
Morning. Question, revisiting the EBITDA sort of point that you made. If I heard it correctly, you talked about the acquired business having EBITDA in the mid to high teens. Alongside that, in the presentation, you talked about reducing cyclicality in your overall portfolio. The question really is that how has that EBITDA margin looked for the acquired business or across a cycle? Part one. Part two of that question is how does Boral's acquired EBITDA or EBITDA margin compare to your existing building products business?
Hassan, this is Steve. When you think about the cycle, there are two major components in these businesses, what I would call new construction and repair and remodel. Repair and remodel has been very stable in terms of long-term demand and growth in this market. We all know that new construction does have its ups and downs, but the stability of repair and remodel is very clear and tends to have a very nice margin associated with it. When you think about the business that we have in our legacy Westlake building products businesses, it had pipe fittings, moldings, and trim, and we had some premium products that Boral brings to the portfolio, which will, I think, meaningfully improve the consolidated margins that you see here that Albert mentioned of mid- to high teens EBITDA margin in this business.
Understood. On the synergy side, it seems the cost synergies you guys are guiding to are roughly around sort of 3% of acquired sales, which, if I take a look at some of the recent and not so recent transactions, seems to be on the lower side. As I sort of sit there and think about maybe some benefit from integration, the fact that Boral has 29 facilities, so maybe there's some inefficiencies over there, and the fact that you're talking about being able to quite easily capture those synergies in the first year, am I on the right track in thinking that maybe you guys are being a little conservative with that number?
I think, Hassan, when you look at the way in which we describe synergies, we always speak in terms of cost synergies and have not, whether it be in this transaction or historic transactions, gotten into the quantification of revenue synergies. I think we'll give you more clarity as we move forward of the opportunities that we see there. We think that we'll achieve these synergies that I've outlined, and you can bet that we'll drive to achieve even more. We had good successes with our prior transactions and synergy achievements, and certainly you can imagine that if once we achieve that $35 million, we will not stop. We'll look to make sure that we achieve all the opportunities that we see in the combined businesses.
Very helpful. Thanks so much, Steve.
You're welcome.
Thank you. Our next question comes from Roger Spitz from Bank of America. Your line is now open.
Thank you very much. Are you able to provide Boral North America Building Products LTM March 2021 or any other that you should like to provide, sales and EBITDA other than the 2020 roughly $1,100 for sales?
Roger, at this stage, I don't have the ability to provide that breakout publicly. The transaction is not closed, and Boral has not disclosed that themselves. Until we get to a point where we own the business, I can't get into disclosing their results beyond what they choose to disclose.
That's fair. Can you say that 10x - 11x EBITDA multiple, does that exclude or include the $35 million synergies?
That excludes that number.
Got it. Thank you very much. Appreciate it.
You're welcome.
Thank you. Our next question comes from Jeffrey Zekauskas from J.P. Morgan. Your line is now open.
Thanks very much. Does Boral install any of the materials that it sells, or it simply sells all of the materials?
It sells it through the same distribution channels and market channels, Jeff, that we sell our products through.
How many people work in Westlake's Building Products division?
$2 ,000.
A couple thousand. How much PVC does Boral buy annually, roughly?
They're not a large PVC consumer. They consume some, but not a large consumer.
Okay, great. Thank you very much.
You're welcome.
Thank you. Our next question comes from John McNulty from BMO Capital. Your line is now open.
Yeah, thanks for taking my question and congratulations again. Can you give us a little bit of color as to how to think about how much of this business is currently tied to the remodel side and how much of it is tied to the new home side, percentage-wise or proportionally?
Yeah, roughly 50/50.
Okay. 50/50. Got it. When I think about the CapEx, it looks like the numbers have kind of moved around a lot for this business over the years, and not surprisingly, were really low last year. I guess what is a normalized CapEx level for a business like this? How should we be thinking about that?
Yeah, this is a small CapEx number that you would expect to see. When you think of this business, it's not capital intensive. It's obviously more people intensive than it is capital intensive. Think in terms of well less than $100 million.
Got it. Okay. Thanks very much for the time.
You're welcome, John.
Thank you. Our next question comes from John Roberts from UBS. Your line is now open.
Thank you, and congratulations on the deal.
Thank you.
You're including the specialty PVC business in building products. How much of specialty PVC actually goes into building products?
Specialty PVC compound business.
Yes.
We are the merchant supplier of compound to building products business and as well as to wire and cable, which goes into building constructions.
Okay. You consider all of your specialty PVC compounds to be building products really?
Yes. It's part of our building products group.
Great. All right. Thank you.
You're welcome.
Thank you. Our next question comes from Matthew Blair from Tudor, Pickering, Holt & Co. Your line is now open.
Great. Thanks. Good morning, Albert and Steve. I was hoping, so on the financing side, it looks like you'll be taking out about an incremental $1 billion of debt for this deal. Would you look to pay that down in the coming years, or is this going to be essentially like permanent debt going forward?
Matthew, as we think about the strong cash generation capability of Westlake that we've been able to demonstrate over the years, we'll look across the maturity spectrum. You'd imagine some would be given the very low interest rate environment we are fortunate to see today. We could put some farther out of that maturity spectrum, but also given the strong cash flow generation that we could expect to pay some of that down, and not put that all out on the far end of the maturity spectrum so that we can retire some of that debt in a relatively more near-term period. We look across the spectrum to see where the best and most attractive opportunities are.
Given the strong cash flow generation of this business plus the rest of Westlake's business, that there could be some opportunities to retire some of that in the relative near- term.
Great. Slide eight shows BNA revenue in 2020 at $1.1 billion. Could you share that same figure for 2019 or at least comment on how much COVID might have impacted this business last year?
Yeah, let me do this. I need to obviously talk to Boral to make sure that they're comfortable in disclosing those kinds of numbers. I'm not free to be able to give their earnings if they haven't disclosed those themselves.
Okay, one last one. Your building products capacity is listed at 3.5 billion pounds. If you look in the K, your actual sales for building products is around 1.3 billion. Could you talk about what's driving the delta there between sales and capacity?
I think, Matthew, when you look at the numbers, you need to be focused on the sales. That number is only inclusive of our pipes, fittings, and exteriors business and not, as we noted, the compounds businesses. The specialty PVC compounds business is part of our business segment, but not reported specifically in the Q or the K. This guidance that you see here that includes the specialty PVC compounds of about $2 billion is the right kind of number to think for 2020 sales revenue.
Okay, thanks.
You're welcome.
Thank you. Our next question comes from Arun Viswanathan from RBC Capital Markets. Your line is now open.
Great, thanks. Good morning, and congratulations on the transaction. I wanted just to think back about some of the larger acquisitions you guys have completed in the last 10 years or so, starting with Boral Group in the last decade and then Axiall as well. Initially, the multiple may seem a little bit high, but it does appear that there's quite a bit of value there. I just wanted to go back, I guess, to understand the synergy side here. I guess you guys have identified $35 million of cost synergies. This acquisition really does take you into some different areas, though. Could you explain a little bit more on the sales side how you expect to achieve some synergies and what they would take a look at?
Would it be kind of salespeople from there who could potentially cross-sell some of their products into your existing customer base and vice versa? Is it something more about going into different markets, whether it be international or extending Boral's reach into commercial construction in large diameter or anything like that, leveraging your existing positions? Maybe just describe a little bit more on the sales synergy side. Thanks.
Arun, when you think of the opportunity set that we see, we've got with Boral concentrations kind of in the West and South, southern regions of the U.S., and we have our businesses more concentrated in the Central and Northeast U.S. and Southeast U.S. The geographies are very complementary to each other, and the distribution channels are also very complementary to each other. We think that the ability for cross-sales are important in the overall synergies, and those are not part of the cost-related $35 million synergies that I mentioned earlier. We think the ability to have a broader geographical fit to be able to move more products through those same distribution channels is important. Those combined values, we think, will make this a nicely accretive transaction as we go forward.
I don't know, Albert, if you'd like to add some additional to that?
Yeah. We definitely utilized, as I said earlier, all the talents from Boral North America combined with existing Westlake's business. I just want to add, also mentioned earlier that part of the Axiall acquisition was the Boral business, which is a very large building product business that we acquired, both in the siding, trim, and molding, as well as pipe and fittings. That was partly the interest that we were in acquiring Axiall. We've been looking at building, expanding our building product business for quite a while now.
Okay, that's helpful. Is it a similar cadence as far as you noted that most of the cost synergies could be realized sooner rather than later? Will the sales synergies take longer, or would those also be more readily available in, say, year one or so?
A good question, and the answer really is that we expect that once we close on this transaction, that the ability to really pull the sales forces together on an integrated basis and have our dialogues with our distribution channel partners happen really on day one, if you want to call it that, after we close. We think that opportunity for revenue cross-selling is clearly there on, let's call it day one. Because we already know these parties that we're selling our products through. It's the same market channels that Boral is selling their products through. We think those sale opportunities exist on day one.
Great. Thanks a lot.
You're welcome.
Thank you. Our next question comes from Bob Koort from Goldman Sachs. Your line is now open.
Thank very much. Good morning.
Good morning.
Steve, I think you mentioned that the margin stability in Building Products may be a reason that they're more highly valued companies generally. On your slide, it appears there's a peer group that isn't that highly valued and a peer group that's substantially higher valued. Can you give us some sense of what differentiates along that spectrum and leads to better valuations for the Building Products peers?
Yeah. Bob, it's a good question. The answer really is that when you look at really those products that differentiate themselves, that are really what I would call in the premium positions of their marketplace, really is the way to distinguish themselves. When you think of the premium products and the leading positions of Westlake and Boral is really the product name or the brand name that you see here. The ability to really have deep market penetration from good, better, best range of product offerings is really critical to be able to not just offer 1 set of products to a customer set, but to have that good, better, best range of product offerings. Having that range of product offerings and a geographical footprint that covers really the entire marketplace from East Coast to West Coast is really important.
When you look at the offerings of some of those that trade less well, it's a function of really having a more commoditized set of offerings versus that, what I would call good, better, best range, and the ability to have a geographical footprint to sell that good, better, best through, combined with what we believe to be leading positions in both Boral and Westlake's positionings in the products that we do sell.
I know you're not in a position yet to provide a lot of detail on profitability and trends, and you're going to be isolating your own Building Products Group, I suppose, to expose the quality there. How do you measure margin stability? Do you look at it in terms of volatility within the margin, consistency in that margin? Can you just give us some sense of what the history looked like at your own business over time that might lead to a revaluation of that asset base?
Yeah. It is that consistency of margin and the ability to generate much higher free cash flow in this business. As I mentioned earlier, it's a smaller capital business, and so the free cash flow generation, as well as the more margin stability, are all attributes to why these businesses trade at better values. In our chemicals businesses, they're much more capital intensive. In a dollar of revenue to free cash flow there, it's obviously percentage-wise smaller. Whereas when you've got a smaller capital business like the Building Products business, the free cash flow generation is significant relative to those that are more capital intensive. It's some of the margin stability, but free cash flow generation are important elements in valuations.
My last one real quickly, I know that Boral was having some issues with bids and some of its leading shareholder and other stuff there. If this deal didn't go through for any reason, is there a breakup fee payable to Westlake?
Bob, we will file the purchase agreement in our Q, but I can't speak to the document until we file it.
Got you. Okay, thanks.
Thank you. Our next question comes from Dan Lungo from Bank of America. Your line is now open.
Hey, guys, thanks for taking my question. Just a quick one on the balance sheet. This is going to take you up into the 2.5x net leverage range. You might talk about wanting to pay down some debt after this transaction, what is the leverage target that you guys would aim for? Is it sub 2x to 1x-2x? Just any type of commentary. If it's debt cap, that also works.
No, when we think of this, and we certainly have had dialogue with the rating agencies very recently and certainly very consistently, and we've told them that we run a very conservative balance sheet. The way we think about targets is not get fixated on a number, because as you can see over time, the agencies change the goalpost in terms of what is investment grade, solidly investment grade. We've communicated to the public and communicated to the agencies consistently that whatever set of parameters they're going to set for solid investment grade metrics are the metrics that Westlake is going to set its targets for. We've got a commitment by management and the board. We've communicated that to the public and to the agencies.
When you look at our credit metrics, you can see they're actually well exceeding even the ratings we have today. As we went through a period during the pandemic, I think you can see some of the agencies, a few of them were more proactive than others, and some were more, I think, pragmatic than others. As you look at the credit metrics as we sit today, I think you can see that we've got a solid balance sheet and we continue to maintain that solid balance sheet.
Great. Thank you.
You're welcome.
Thank you. Our next question comes from Keith Chau from MST Marquee . Your line is now open.
Good morning, Albert and Steve, I share the reflections of the other analysts and congratulations for the transaction.
Thank you.
I'll just ask a quick follow-up question for Steve Bender. Your 10x-11x EBITDA multiple that you've disclosed, I'm just trying to understand the basis on which that multiple is provided. Seems unlikely that it is the FY 2020 year, given the COVID issues that Boral traversed through in that period. Just wondering what the basis for that 10x-11x multiple is, whether that's an FY 2019 number, your assumption of what normalized earnings are, and bearing in mind, obviously, the sensitivity of our Boral's numbers for the 2017 period as well.
Yeah, that's a current multiple at this stage. We think that, as I mentioned earlier, with the synergies that we see both on a cost basis and revenue basis, we think the multiple comes down meaningful, but that's a current multiple.
Thank you. Appreciate it.
You're welcome.
Thank you. Again, ladies and gentlemen, if you have a question, that is star one. Again, if you would like to ask a question, ladies and gentlemen, that is star one. We have a follow-up question from Jeffrey Zekauskas from J.P. Morgan. Your line is now open.
Thanks very much. What's the cost of achieving the synergies that you aim for?
Jeff, these are going to be cost-related synergies. I don't see these costs as being overly significant. Certainly, there are some transaction costs, legal and financing costs that'll be necessary here. We think that we'll flush those through in 2021, and that's why we believe in the first full year combined operations that it will be accretive. We've not given a specific cost for legal cost and financial financing cost. These are not overly significant relative to the size of the transaction. We used a single financial advisor, a single legal firm, and the cost to achieve that $35 million are not significant relative to the size of the business or the synergies that we think we'll deliver.
What do you think the ultimate synergies of the transaction are over a multi-year period?
Well, Jeff, as I mentioned earlier, when you think of transactions we've accomplished in the past, we set the focus on achieving cost-driven synergies. Of course, we're not only looking at those, looking at revenues. As I mentioned, we're not going to stop at the 35 number that we voiced today. We certainly believe there could be synergies above those, and certainly we'll work very hard to achieve those $35 million plus any of those that we see beyond that. We won't stop at $35 million. If you look at our history, we've certainly been able to achieve synergies above those that we've talked about after the day of the announcement.
Finally, can you talk a little bit about the geographic overlay of the business that you're acquiring with the building products that you have? Where are the geographic strengths of both businesses? Where are they a little bit different in terms of where they sell?
Yeah. Jeff, Boral North America is concentrated really in some of the higher growth markets, such as in the South and the West. Westlake's concentration is more in the center of the country and Southeast and Northeast. The geographies nicely overlap and complement each other in terms of our ability to reach all market channels and all of our distribution channels nicely. Without the addition of Boral, we had clear opportunities to grow further in the kind of West and South. With this combination, we're filling those gaps in our market footprint. This provides us an ability to really cover the markets from the East Coast to the West Coast.
Okay, great. Thank you so much.
You're welcome.
Thank you. I am showing no further questions. I would now like to turn the call back over to Jeff Holy for closing remarks.
Thank you again for participating in today's call. We look forward to speaking with you again on our second quarter earnings call.
Thank you for participating in today's Westlake Chemical Corporation conference call. As a reminder, this call will be available for replay beginning two hours after the call has ended and may be accessed until 11:59 PM Eastern Time on Monday, June 28th, 2021. The replay can be accessed by calling the following numbers. Domestic callers should dial 855-859-2056. International callers may access the replay at 404-537-3406. The access code for both numbers is 2963369. This concludes today's conference call. Thank you for participating. You may now disconnect.