Builders FirstSource To Buy ProBuild For $1.63 Billion

Builders FirstSource announced its agreement to purchase ProBuild Holdings, one of the largest suppliers of professional building materials in the United States.

The stock price of Builders FirstSource surged more than 59% to $11.02 per share at the time of this writing around 11:24 A.M. in New York.

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Builders FirstSource next phase of growth

In a statement, Builders FirstSource CEO Floyd Sherman said the transaction with ProBuild is compelling because the combination will “create a more diversified company with enhance the scale and improved geographic footprint.

Sherman also said, “We believe now is the ideal time to position Builders FirstSource for its next phase of growth and value creation. Together we will establish a broader, more efficient platform of manufacturing and distribution capabilities.”

According to him, Builders FirstSource and ProBuild have the best sales forces in the industry, and both companies have a commitment to improving customer relationships.

Transaction details

Builders First Source is a leading supplier and manufacturer of structural and related building products for new residential construction in the country. The company agreed to pay $1.63 billion in cash to acquired ProBuild.

The merger of the two companies will create a national pro dealer. The combined revenues of Builders FirstSource and ProBuild were approximately $6.1 billion in 2014.

According to Builders FirstSource, the transaction provides a significant opportunity to expand in four customer segments including production builders, custom builders, multi-family/commercial, and repair & remodel. The combined company will be able to capitalize on the continued recovery of the housing market.

In addition, the combined company will have the presence in 40 states and top 25 metropolitan statistical areas in the country. Builders FirstSource expected its sales to grow with higher margin products.

Builders FirstSource estimated that the combined company will achieve an annual run-rate, cost-saving synergies of approximately $100 million to $120 million during the first two years after the closing of the deal.

Builders FirstSource will finance the transaction through its existing $350 senior secured notes, new debt issuances in the form of $295 million drawn under a new $800 million ABL facility, and a new $550 million Term Loan B. The company is also expected to issue $70 million in new senior unsecured notes and $100 million of new equity through a public offering of its shares of its common stock.

Sherman will serve as CEO of the combined company and Chad Crow as CFO. ProBuild CEO Robert Marchbank will remain part of the company’s leadership team to support integration planning and smooth transition.

The transaction is expected to close in the second half of 2015 subject to customary closing condition and regulatory approvals.