A majority stake in US LBM Holdings, the nation's seventh-biggest pro-oriented building material dealer, is being acquired by the private investment firm Kelso & Company, ProSales learned today. Terms of the transaction were not disclosed.

The definitive agreement signed on July 24 and expected to be completed in a few weeks means there'll be a new owner of the fast-growing dealer, but it won't alter the company's management team or business philosophy, US LBM president and CEO L.T. Gibson asserted.

"I feel we have found the right partner for our team and our business," Gibson told ProSales today. "Partnering with Kelso allows us to continue to pursue building a great company, as well as giving us resources to find new and better ways to improve and serve our customers in a changing industry.  Our new capital structure will allow us to continue to grow organically and through acquisitions.  The management team and BlackEagle [Partners, US LBM's previous majority owner] are all reinvesting and excited for this next chapter in the US LBM story."

Sandy Osborne, Managing Director at Kelso, said in a statement prepared for the announcement that “We are pleased to be partnering with BlackEagle, L.T. and the impressive team at US LBM, both at the corporate level and at the individual business units. We are excited to support the company as it continues its growth.”  

And BlackEagle managing partner Michael Madden said in the same prepared statement:  “We have worked alongside L.T. and his team for six years to build a world-class company, and we look forward to continuing the company’s upward trajectory in partnership with Kelso.”

New York-based Kelso first emerged as the potential buyer when a Reuters article reported on July 1 that it was the lead candidate for a deal that would value US LBM at about $1 billion. Based on its investment history, its only LBM-related investment ever is a Canadian timber company called EACOM.

US LBM was created just five years ago out of several firms that had been acquired by Stock Building Supply and then cast off when Stock went through a Chapter 11 bankruptcy reorganization. Gibson--an executive at Stock--teamed up with investment firm Building Industry Partners and BlackEagle to create a company dedicated to a business model that emphasized a tiny central office, substantial local authority, and cross-enterprise sharing of best practices. While officially based in Green Bay, Wis., virtually nobody in the head office works there; all the senior management, Gibson included, live in other cities.

US LBM's model is widely credited with enabling it to outpace its rivals; in 2014, its revenues grew 79%, second-best among all ProSales 100 companies, to reach $1.42 billion with profit margins in the upper single digits. Meanwhile, its achievements in technology and education were the principal reasons why the company became this year's ProSales Dealer of the Year.

BlackEagle has held the majority stake in US LBM since its inception, while Gibson and US LBM's unit presidents own roughly a quarter of the company. Because most private equity firms typically don't hold a company more than five years, it's been an open secret for half a year that US LBM was for sale. Throughout that period, Gibson searched for an investor that would let the company continue the status quo.

Credit Suisse and Debevoise & Plimpton LLP advised Kelso on the transaction, and Harris Williams and Honigman Miller Schwartz and Cohn LLP advised US LBM.