Louisiana-Pacific Corporation (LPX) recently acquired the remaining 25% equity interest in Louisiana-Pacific-Brasil OSB Industria e Comercia S.A. (LP Brazil) through its subsidiary Louisiana-Pacific South America (LPSA).
Louisiana-Pacific-Brasil OSB Industria e Comercia S.A. was jointly formed in 2008 by Louisiana-Pacific Corporation and Masisa do Brasil LTDA (Masisa Brazil), a subsidiary of Masisa S.A. in Chile. As per the joint venture agreement, LPSA then bought 75% of the LP Brazil plant and related assets located in Ponta Grossa, Parana, Brazil.
The agreement also included a put/call option for the remaining 25% ownership in Masisa Brazil. Finally, on May 12, 2011, Masisa Brazil exercised its option to sell the remaining ownership.
The acquisition cost Louisiana-Pacific almost $24 million including working capital. Out of it, almost $19.5 million was funded with cash and the remaining $4.5 million was funded with borrowings made under a short-term credit facility with a Chilean bank.
The takeover is viewed as a significant effort by the company for extending its business in South America. Brazil exhibits huge potential going forward and LP Brazil is well-positioned to provide affordable housing in Brazil. The acquisition is also expected to meet the rising demand for structural panels in South America.
During the first quarter of 2011, Louisiana-Pacific reported a loss of $23 million or 18 cents per share from continuing operations. The loss remained unchanged year over year driven by lower tax benefit rate in 2011 despite an overall satisfactory performance by the company. Net sales for the quarter went up 12% to $332 million from $297 million in the corresponding quarter of 2010, partly offset by lower housing starts.
Louisiana-Pacific retains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.
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