USG Corp. has announced it will invest $60 million in a strategic partnership with the Zawawi Group of Oman to meet the growing demand for its wallboard products in the Middle East and India. The money will be invested over two years, with the majority in 2012.
“This is an important step forward in our strategic initiative to diversify the sources of USG’s earnings by investing in higher-growth international markets,” said James Metcalf, chairman, president and CEO. “The market in India and more broadly in the Middle East represents an attractive growth opportunity.”
The first phase will be the establishment of a mining joint venture through which USG will acquire 55% of Zawawi Gypsum, which holds the mining rights to a gypsum quarry in Salalah, Oman. The joint venture will develop infrastructure and operate the quarry. Salalah has shipping access to many ports on the Indian coast and will provide gypsum to future USG wallboard plants, as well as to cement manufacturers in the region. Quarry mining operations are targeted for startup in the third quarter of 2013.
The second phase of the partnership will be a 50/50 manufacturing joint venture with Zawawi Minerals to build and operate a new low-cost wallboard plant in the Salalah Free Zone, Oman. The Free Zone in Oman is an enterprise zone that has been operational for three years and has attracted in excess of $4 billion in investments from international companies. The plant site is in close proximity to the gypsum quarry and port facilities, facilitating efficient access into markets in India and the Middle East. The target for commencement of wallboard production operations is the fourth quarter of 2013.
Chris Griffin, executive VP operations, said: “Through the joint ventures, we believe that we can enhance our success in India by securing the strategic gypsum rock source in Oman, and cost-effectively shipping products to India, thereby accelerating USG wallboard penetration in the region. USG’s strong brand recognition and state-of-the-art technology combined with Zawawi’s local strength, resources and management expertise should contribute to increased sales and profitable growth for both organizations.”
USG also announced that it is exploring strategic alternatives for its wholly owned European operations, including their possible sale. Those businesses include the manufacture and distribution of ceiling grid systems and finishing compounds throughout Europe and Russia.
Headquartered in Chicago, USG Corp. is a manufacturer and distributor of building products through United States Gypsum Company, USG Interiors, and L&W Supply Corp. and other subsidiaries.