Jefferies Remains Sidelined as USG Corp. (USG) Plans L&W Divestiture
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Jefferies reiterated a Hold rating and $33.00 price target on USG Corp. (NYSE: USG) following the company's announced divestiture of L&W. USG is selling L&W for $670 mil or 12.9x EV/EBITDA and is expected to close in 4Q16. $600 mil of the proceeds will be used to recall debt, reducing interest expense to $80 mil in 2017.
Analyst Philip Ng commented, "We are encouraged by the divestiture of L&W, which improves its BS and flexibility to deploy capital in higher return businesses, and could drive multiple expansion. While we expect USG to manage the situation well, with 30% of its wallboard business tied to L&W that could roll off once the supply agreement with ABC Supply ends, there is the potential for some share leakage, which could weigh on pricing."
Shares of USG Corp. closed at $29.94 yesterday.
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