BGC shifts its focus to Midland Brick

BGC is shifting its focus to its Midland Brick business, investing $27 million in the subsidiary as it transitions to new leadership. 

Michael Allan is set to replace Daniel Cooper as BGC Australia’s chief executive, after Mr Cooper’s six and a half years in the job. 

Mr Allan has been with the company for seven years, including the past 18 months as its chief financial officer. 

The transition is occurring following the recent settlement of BGC Australia’s cementitious division, which will leave BGC with two main entities – its residential building business and Midland Brick. 

BGC Australia sold its cementious division to Cement Australia and Adbri in its largest ever asset sale, believed to be worth about $800 million. 

The division comprised BGC’s asphalt, cement, concrete, quarries, transport and materials technology businesses.

The company has been in the process of selling its assets since the death of its founder Len Buckeridge in 2014.

Last year, BGC sold its fibre cement business to Belgian-based building materials manufacturer Etex for $163.6 million, making a $92.7 million gain on the sale. 

It also sold its commercial construction arm to Len Buckeridge’s stepson Julian Ambrose, who has rebadged it as Atlas Building (WA).

BGC’s residential division BGC Housing is winding down operationally, after it stopped selling new homes in March 2023. 

Therefore, the company’s major business now is Midland Brick, which is the state’s sole brick manufacturer. 

Mr Allan said BGC planned to invest substantial capital into growing it ahead of its eventual sale.

“As far as what’s left, we’ve got Midland brick, which is a substantial business, and we’re intent on growing that and optimising it,” he said. 

“There’s no decision there on sale, and we’ve got lots of great plan; we’re spending $27 million in capex this financial year alone. 

“There’s a housing crisis, so this is about meeting the future demands the market.” 

Investment in Midland Brick, which currently employs about 500 people, will include spending on equipment and technology and personnel. 

He added that there was a pipeline of about 150 homes to complete under the BGC Housing Group banner, which would take it into the end of 2026. 

The company would then still need to operate for at least six years after that, as part of its statutory warranty obligations. 

Legal action

BGC Housing Group is facing a class action from homeowners claiming the company took too long to build their houses. 

Additionally, BGC is suing pipe manufacturer Iplex over a series of burst pipes in BGC built homes between 2017 and 2022. 

And because of this lawsuit, BGC-built homes are exempt from a state government scheme offering customers with burst pipes compensation. 

Mr Allan explained that BGC has spent about $40 million on fixing faulty pipes in homes to date, and that it was one of the biggest issues the company faced. 

“We’re really conscious of homeowners and what they’re going through at the moment,” he told Business News. 

“It’s about rectifying as quickly as we can [and] doing it in a safe way.”

He could not put a figure on the full repair costs associated with Iplex pipes, and stressed that BGC could not enter the deal offered by the state government. 

“We can’t go into that deal … we [would] have to … give up all our legal rights,” he said.

A separate class action is being taken against Iplex parent company Fletcher Building, from homeowners impacted by burst pipes.  

“The issue with that is the class action that’s also happening with that … has the potential to blow up that industry deal,” he said. 

“For us, you know, we just can’t accept that, so we’ve got to work up a longer-term deal that’s going to deliver for homeowners.” 

Cementitious deal 

BGC initially intended to sell its cementitious division to Cement Australia's shareholders, but the Australian Competition and Consumer Commission stepped in with concerns over the deal. 

The division was carved up into two separate entities, with its ready mix concrete (RMX) and aggregate quarries going to Adbri and some cement assets and some RMX selling to Cement Australia. 

The ACCC cleared the deal in September, on the basis that the assets were split between two buyers. 

“An initial proposed structure for the acquisition of BGC by Cement Australia, Holcim and HMA raised significant preliminary competition concerns for us, particularly in relation to the competitive overlap in RMX and aggregate quarries in Western Australia,” ACCC commissioner Philip Williams said at the time. 

“In particular we looked at both the loss of BGC as a competitor in the supply of RMX and the risk that Cement Australia or Adbri would use their position as cement suppliers to hinder the ability of rival RMX suppliers to compete.”

“While we acknowledge strong concerns from some market participants, we found that Cement Australia and Adbri would be likely to compete with each other to supply cement to RMX competitors after the acquisition.” 

Commenting on the deal, Mr Allan acknowledged the competitive concerns raised by the ACCC. 

“The concrete business [was] basically the customer facing element of our business. … so that’s where I guess the competitive concerns were from the ACCC, that we maintain that level of competition. 

“That probably drove the structure of the deal, from when we signed back in December, where it was solely with cement Australia, to what we ended up with. 

“We’ve gone from selling to one party to now selling to a couple of parties.” 

Leadership transition

Daniel Cooper. Photo: David Henry

Mr Allan will take the reins as chief executive on Monday October 20, with no replacement for his current role announced. 

The role of chief executive at BGC is expected to undergo a restrucutre as Mr Allan takes over. 

Daniel Cooper, who joined the company in June 2019 after three years at UK building materials company Hanson, is planning to move back to Queensland to be closer to family.

Mr Allan thanked Mr Cooper for his contribution to the company, and said he was looking forward to the next phase. 

“The cementitious business sale is an important milestone for BGC and its shareholders, but there is a lot more work to be done,” Mr Allan said. 

“Beyond the cementitious sale, the BGC Group will continue to operate substantial businesses employing circa 800 employees, primarily focused on bricks and masonry, residential construction and maintenance.”

Mr Cooper said the recent divestment of the cementitious division provided the ideal opportunity for him to exit the business, after six rewarding years. 

“I’m looking forward to returning east to be closer to my family and am confident Mike will guide BGC into its next chapter with purpose,” he said.