Friday, 25 Sep 2020

Builders FirstSource to buy rival BMC in bet on U.S. housing market recovery

(Reuters) – U.S. residential building materials maker Builders FirstSource Inc (BLDR.O) on Thursday agreed to buy BMC Stock Holdings Inc (BMCH.O) in an all-stock deal that values the smaller rival at about $2.5 billion.

Shares of BMC surged as much as 24.4% to a record high of $40.09, above the implied offer price of $36.63, while Builders FirstSource’s stock rose 10.2% to an over one-week high of $30.77.

The deal comes as the U.S. housing market stages a strong recovery from the crippling fallout of coronavirus-induced lockdowns, helped by record-low mortgage rates and a shift to suburban areas.

U.S. homebuilding accelerated by about 23% in July, the most in nearly four years, up from a 17.3% rise in June, data from the Commerce Department showed last week.

The companies, which manufacture floor and roof trusses, wall panels, stairs, windows and doors, will have a combined market capitalization of $5.44 billion based on Wednesday’s close.

BMC investors will receive 1.3125 shares of Builders FirstSource stock for each BMC share held, representing an about 14% premium to BMC’s last close.

BMC Chief Executive Officer Dave Flitman will head the combined company and assume the role of CEO following a 90-day period after the deal closes, succeeding Builders FirstSource chief Chad Crow, who will retire.

Builders FirstSource shareholders will own about 57% and BMC 43% of the new company, with the deal expected to close in late-2020 or early 2021, the companies said.

The deal is expected to add to the combined company’s adjusted earnings per share in the first year after closing and generate about $130 million to $150 million in annual run-rate cost savings within three years. 

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