Beacon Roofing Supply, the nation's second-biggest roofing company and third-biggest pro-oriented dealer, announced today it will acquire Roofing Supply Group (RSG), the No. 11 firm on the ProSales 100, for roughly $1.1 billion. The deal adds 83 locations across 24 states to Beacon's portfolio, growing it to roughly $3.7 billion in revenues from 356 branches in 45 states and six Canadian provinces.
Investors cheered the news, pushing Beacon's stock up roughly 10% in the first two hours of trading before tailing off slightly and finishing the day up 8.7%.
Herndon, Va.-based Beacon will pay RSG shareholders--basically, the investment firm Clayton, Dubilier & Rice--about $286 million in cash and roughly $291 million in Beacon common stock. Beacon also will refinance about $565 million of RSG's net debt.
"In addition to benefitting from an expanded geographic footprint, Beacon will be able to provide greater customer service through more diversified product offerings across its newly acquired and existing branches," Beacon said in a news release. "The transaction is expected to ... generate annual run-rate synergies of approximately
The deal is expected to close in October, Beacon said. It expects to finance the transaction with a new asset-based revolving loan, another term loan, and a senior unsecured bond offering.
Dallas-based RSG brings to Beacon valuable locations in three of America's fastest-growing markets--Texas, Florida, and California--and plants Beacon's flag in the Pacific Northwest with locations in the Seattle and Spokane, Wash., markets. There also are signs that RSG brings something else: Operating losses. "The [deal's] tax-efficient transaction structure is expected to enable Beacon to retain approximately
"The acquisition also adds scale to our commercial business and expands our capabilities within our complementary businesses," said Paul Isabella, Beacon's president and CEO, in the news release.
RSG took in roughly $1.2 billion in revenue last year, according to its ProSales 100 report. In a presentation to analysts this morning, Beacon further sketched out the 34-year-old company's size and scope: it gets 62% of its sales from residential, 38% from commercial, for instance, and derives 78% of its income from re-roofing work. Here's the slide from Beacon's presentations on how it and RSG's sales compare:
This is the third blockbuster deal to rock the lumber and building materials supply industry since April, when Builders FirstSource (No. 6 on the ProSales 100) announced it would acquire ProBuild (No. 2). Then in June, BMC (No. 9) and Stock Building Supply (No. 10) declared they would come together.
Even after it swallows RSG, Beacon still will trail ABC Supply on the ProSales 100 list. ABC had revenues of $5.26 billion last year and 493 locations as of the start of 2015.