Beacon Roofing to acquire Allied Building Products from CRH for $2.625B in cash

Beacon Roofing Supply (BECN) announced that the company has entered into a definitive purchase agreement to acquire Allied Building Products from global diversified building products group CRH (CRH) for $2.625B in cash.

#Beacon expects to finance the acquisition with approximately $2.2B of debt financing through an upsized ABL revolving credit facility, an upsized term loan B facility, a new unsecured senior note and approximately $500M of committed convertible preferred equity financing from an entity affiliated with the investment firm Clayton, Dubilier & Rice, which in October 2015 sold Roofing Supply Group to Beacon.

The parties currently expect to consummate the transaction on or around January 2, 2018, subject to satisfaction of customary closing conditions.

The combination of Beacon and Allied will make Beacon one of the largest publicly traded wholesale building materials distributors in North America with pro forma revenues of approximately $7B and 593 branches in all 50 states and 6 provinces across Canada.

Beacon will also become the fourth largest wallboard and acoustical ceiling tile wholesale distributor in the U.S., with more than $1B of revenue in the interior market category.

The combined company is expected to realize $110M in annual run-rate synergies within two years of closing.

Excluding year one incremental transaction-related amortization of approximately $70-80 million and year one acquisition costs of approximately $65-75 million, Beacon expects the transaction will be immediately accretive to adjusted earnings per share by approximately $0.50-0.60 in year one.

Beacon expects the transaction will be accretive to GAAP earnings per share in year two. Following the close, Beacon expects rapid de-levering to result from the anticipated combined EBITDA of the new Beacon entity, realization of cost savings and strong pro forma free cash flow generation.

The trailing twelve month June 30, 2017 Adjusted EBITDA of Allied coupled with significant run rate synergies of $110M results in a transaction purchase multiple of 8.7x. Following completion of the transaction, Isabella will continue to serve as President and CEO of the combined company, and Buck will remain Chairman of the Board of Directors. Feury, CEO of Allied, will continue in a key executive leadership role, focused on integration and growth, reporting to Isabella.

Philip Knisely, an advisor to the CD&R Funds, will remain on Beacon’s Board of Directors. Sleeper, a Partner at CD&R, will rejoin Beacon’s Board of Directors.

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