From file "022_PSs" entitled "PWbmhc08.qxd" page 01
From file "022_PSs" entitled "PWbmhc08.qxd" page 01

During an April 26 BMHC conference call on first-quarter earnings, BMC Construction's CEO Mike Mahre described an “end game” for the San Francisco–based pro dealer and construction services provider that included becoming “an integrated, multi-trade construction company.” When a reporter asked if Mahre could foresee a future where BMHC could be most accurately described as an integrated “full-trade” construction company, the answer was simple and direct: “Yes.”

That future moved one step closer to reality on June 13 when BMHC announced it had entered into an agreement to acquire a majority interest in BBP Cos., a Phoenix-based firm with 2004 sales in excess of $100 million providing concrete foundation services to high-volume production home builders in Arizona. With the acquisition, BMC Construction, BMHC's construction services division, is poised to offer production home builders in the region a full foundation-to-framing package that includes framing from BMHC-owned KBI Construction, as well as plumbing from Riggs Plumbing, a turnkey rough and finish plumbing firm serving production builders in Phoenix and Tucson that BMHC acquired a majority interest in on April 19.

“At this stage we're picking up what we're most comfortable with, and the synergy between these three trades at the beginning of the construction process makes them [a natural combination],” Mahre says, adding that many Arizona jobsites are already manned by the combined forces of KBI, Riggs, and BBP contractors. While BMC Construction lets builder-customers pick and choose from its range of services, the eventual goal is to provide a single-source construction package. “It is still a la carte, if you will, but our view is that over time builders will realize the savings and value proposition [of single-source construction services],” Mahre says. “We want to integrate this into a single company with a shared culture and objectives, not just a loose consortium of subcontractors, and these three companies will initially show if we can walk the talk.”

Raleigh, N.C.–based Stock Building Supply is also jumping into the plumbing arena via partnership with its sister company, Newport News, Va.–based Ferguson, a plumbing and HVAC wholesaler/retailer with 2004 sales of $5.9 billion. According to Stock president and CEO Fenton Hord, the success of an 8,200-square-foot Stock/Ferguson design center launched last December in Carrboro, N.C., is now green-lighting additional joint showroom ventures across the country. “We've opened one in Alexandria, Va., one in Atlanta, and we're about to open one in Santa Barbara, Calif., and there will be more coming,” Hord says. “We've got plans for an operation in Texas, one in upstate New York, and we've also got a number of what we are calling ‘Express' stores that are Ferguson stores imbedded in Stock locations stocking about 2,500 SKUs.”

While the design centers are tailored to the custom home builder and the repair and remodel segment, Hord sees Stock/Ferguson synergies that will eventually benefit big builder customers, as well. “The thing that I think will be important to the big builder is if Stock and Ferguson can get their act together and offer the complete product mix that we both have available and offer it through one source, through one vendor—then you've got something to talk about.”

In addition to product sales, Hord estimates that Stock did approximately $300 million worth of installed business in fiscal year 2004 and expects that trend to accelerate in fiscal year 2005. “Our view is that we know we have to be installing what we sell in the future, particularly to the production builders,” he says. “So that will be becoming a larger and larger part of what we do.

That may put some heat on BMHC as they eventually expand BMC Construction's integrated “multi-trade” construction services to metro areas dominated by production builder activity. “We don't expect to be alone in this endeavor for very long,” Mahre says. “We're always looking over our shoulder at any number of players including the pro dealer, the vertically integrated builder, or a joint subcontractor venture.”