Builders FirstSource, Inc. (Nasdaq: BLDR) (“Builders FirstSource”)
and BMC Stock Holdings, Inc. (NASDAQ: BMCH) (“BMC”), today
announced that they have entered into a definitive merger agreement
under which Builders FirstSource and BMC will combine in an
all-stock merger transaction to create the nation’s premier
supplier of building materials and services. The companies
will host a joint conference call today at 7:30 a.m. Central Time
(8:30 a.m. Eastern Time) to discuss the transaction.
Under the terms of the agreement, which has been
unanimously approved by the Boards of Directors of both companies,
BMC shareholders will receive a fixed exchange ratio of 1.3125
shares of Builders FirstSource common stock for each share of BMC
common stock. Upon completion of the merger, existing Builders
FirstSource shareholders will own approximately 57% and existing
BMC shareholders will own approximately 43% of the combined company
on a fully diluted basis. The merger is expected to be tax free for
U.S. federal income tax purposes.
After a 90-day transition period following the
completion of the merger, Chad Crow, current Chief Executive
Officer of Builders FirstSource, will retire as previously
announced and will be succeeded as Chief Executive Officer of the
combined company by Dave Flitman, current Chief Executive Officer
of BMC. Thereafter, Mr. Crow will continue to be available on a
consulting basis to the combined company for a period of time to
support the integration execution and to ensure an orderly
transition.
Mr. Crow said, “This is a transformational
opportunity that unites two outstanding and complementary
companies, providing enhanced scale and superior returns as we
build upon a new, larger platform. Builders FirstSource and BMC
together will have a very diverse portfolio of value-added
offerings and greater resources to more closely partner with and
serve customers. The transaction is expected to produce tremendous
value for the shareholders of both companies through the
realization of significant cost synergies, the realization of
attractive growth opportunities and the acceleration of
technological innovation. Similar to the success of our prior
acquisition of ProBuild, we will be poised to capitalize on the
strength of our combined platform and the significant upside
potential in our key end markets to increase sales, reduce costs
and improve cash flow. We are excited about the opportunities ahead
and look forward to quickly realizing the benefits of this
transaction.”
Mr. Flitman stated, “We believe this strategic
combination of two great organizations is an exciting step forward
for both BMC and Builders FirstSource, as well as for our
associates, our customers and other key stakeholders. As we
accomplished in our prior combination with Stock Building Supply,
this transformational merger will enable BMC to further accelerate
our profitable growth strategy with a company that also focuses on
providing a broad product portfolio and differentiated capabilities
deployed through a customer-focused service model. Our
customers and associates will benefit from the strengths of our
exceptional teams, who share common values and a dedication to
providing innovative services and solutions. We believe this
compelling combination will enhance our ability to deliver
outstanding customer service, generate attractive financial returns
and create shareholder value. I look forward to working closely
with Chad and the collective management teams of both companies to
complete the transaction and further advance our next chapter of
profitable growth.”
Strategic Rationale and Financial
Benefits of Winning Combination
- Leading Supplier of Building Materials and
Services: The combined company will become the
nation's premier supplier of building materials and services, with
combined sales in excess of $11 billion and approximately 26,000
team members. The combined company, operating a leading network of
550 distribution and manufacturing locations, will have a presence
in 42 states, including 44 of the top 50 metropolitan statistical
areas, covering most of the nation’s fastest growing regions.
- Enhanced Value-added Offerings: Benefitting
from the focus on value-added product and service capabilities that
both Builders FirstSource and BMC have long shared, these offerings
will represent approximately 43% of the combined company’s sales.
BMC’s distinct millwork capability, READY-FRAME® offerings and
other manufactured products will complement Builders FirstSource’s
strengths in trusses and manufactured components, among other
offerings, to enable further penetration of key segments through
the delivery of value-enhancing efficiencies to customers and
superior solutions across a broader platform.
- Expanded Geographic Footprint and Strengthened
Distribution Network: The combined company’s increased
geographic reach and diversity will provide a wider set of
opportunities and deeper resources for organic and inorganic growth
to meet the needs of more customers in the highly fragmented
professional building materials industry nationwide.
- Significant Synergy Opportunities and Earnings
Accretion: In addition to expanded top-line growth
opportunities, the combination is expected to generate
approximately $130 million to $150 million in annual run-rate cost
savings within three years. Key drivers of these synergies include
procurement, SG&A savings and expanded operational excellence
through the adoption of best practices from each company. The
transaction is expected to be accretive to adjusted earnings per
share in the first year after closing.
- Strong Financial Profile and Capital
Flexibility: The combined company will be supported by a
strong financial profile, with combined Adjusted EBITDA(1) of
approximately $950 million for the trailing twelve-month period
ended June 30, 2020, including annual run-rate synergies, and
combined net debt-to-Adjusted EBITDA(2) of 1.4x. The combined
company will remain operationally and financially disciplined with
a focus on driving robust free cash flow, preserving its strong
balance sheet and flexible capital structure to pursue a wide range
of capital deployment strategies and deliver additional value to
shareholders.
- Accelerated Innovation: The combined company
will have far greater resources to invest in innovation and develop
targeted solutions, which is expected to accelerate the next
generation of growth and deliver value on behalf of our
customers.
- Complementary Cultures: The combined company
will bring together two strong performance-based cultures focused
on people, safety, innovation, collaboration, integrity, diversity
and corporate social responsibility. The collective workforce of
highly skilled team members will benefit from expanded
opportunities for career development and be empowered to provide
best-in-class service to customers and communities.
Leadership and Governance
Following the transaction closing, the combined
company will operate under the name Builders FirstSource, Inc. and
will be headquartered in Dallas, TX, while maintaining key
functional corporate centers of excellence in both Raleigh, NC and
Denver, CO.
In addition to the succession of Dave Flitman as
Chief Executive Officer of the combined company, the management
team will be comprised of leaders from both organizations. Peter
Jackson, Chief Financial Officer of Builders FirstSource, will
serve as Chief Financial Officer of the combined company. The
transition and integration of the combined company will be led by
Dave Rush, Chief Operating Officer of Builders FirstSource’s East
Region, who led the integration team for Builders FirstSource in
its ProBuild acquisition, and Jim Major, Chief Financial Officer of
BMC.
Upon closing, the combined company’s Board of
Directors will have 12 directors, consisting of seven members from
the Builders FirstSource Board of Directors and five members from
the BMC Board of Directors. Paul S. Levy, Co-Founder and current
Chairman of the Board of Builders FirstSource, will serve as
Chairman of the Board of Directors of the combined company.
Mr. Levy commented, “We are excited to join
forces with BMC. We started Builders FirstSource in 1998 with an
ambitious vision, and the combination of these two exceptional
companies represents another significant milestone, further
enhancing value for all stakeholders. Our ability to continue to
build our world-class organization exists because of the
extraordinary commitment of our many teammates, led through many
incredibly dynamic periods by Chad Crow and our prior CEO, Floyd
Sherman, and we look forward to continuing that strong legacy of
leadership under Dave Flitman. I have full confidence in the
unified team to accelerate the success of this larger platform and
continue building upon our powerful momentum into 2021 and
beyond.”
Timeline and Approvals
The transaction is expected to close in late
2020 or early 2021, subject to, among other things, the expiration
or termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
as well as other customary closing conditions. The transaction
requires the approval of shareholders of both Builders FirstSource
and BMC.
Advisors
Rothschild & Co and Morgan Stanley & Co.
LLC are serving as financial advisors to Builders FirstSource and
Skadden, Arps, Slate, Meagher & Flom LLP is serving as its
legal advisor. Moelis & Company is serving as financial advisor
to BMC and Simpson Thacher & Bartlett LLP is serving as its
legal advisor.
Conference Call and
Presentation
Builders FirstSource and BMC will host a joint
conference call to discuss the transaction today, August 27, 2020,
at 7:30 a.m. Central Time (8:30 a.m. Eastern Time), To access the
live webcast and presentation go to www.bldr.com or
www.buildwithbmc.com. To participate in the teleconference, please
dial into the call a few minutes before the start time:
800-367-2403 (U.S. and Canada) and 334-777-6978 (international),
Conference ID: 1235969. To access the replay, please dial
888-203-1112 (U.S. and Canada) and 719-457-0820 (international) and
refer to the pass code 1235969. The archived webcast will be
available on the respective company's websites.
(1) Combined Adjusted EBITDA for the trailing
twelve month period ended June, 30, 2020 for the combined companies
was $811.6 million, and adjusted for the mid-point of combined
annual run-rate synergies of $140 million and excluding stock-based
compensation savings, estimated costs to achieve synergies and
transaction costs, approximates $950 million. Combined Adjusted
EBITDA for the combined companies is defined as GAAP net income
(loss) before depreciation and amortization, interest expense,
income taxes, gain (loss) on sale of assets, (income) loss from
closed locations, and other non-cash or special items including
asset impairments, facility closure costs, acquisition costs,
severance, conversion, transaction and integration costs, and stock
compensation expense.
(2) Combined net debt-to-Adjusted EBITDA for the
combined companies compares combined net debt outstanding as of
June 30, 2020 of $1,343.0 million to combined adjusted EBITDA,
defined above.
Note: Additional information pertaining to
detailed explanations by each of Builders FirstSource and BMC of
their respective use of non-GAAP financial measures and
reconciliation to the most comparable GAAP measures is also
contained in the parties’ filings with the Securities and Exchange
Commission (the “SEC”).
About Builders FirstSource
Headquartered in Dallas, Texas, Builders
FirstSource is the largest U.S. supplier of building products,
prefabricated components, and value-added services to the
professional market segment for new residential construction and
repair and remodeling. We provide customers an integrated
homebuilding solution, offering manufacturing, supply, delivery and
installation of a full range of structural and related building
products. We operate in 40 states with approximately 400
locations and have a market presence in 77 of the top 100
Metropolitan Statistical Areas, providing geographic diversity and
balanced end market exposure. We service customers from
strategically located distribution and manufacturing facilities
(certain of which are co-located) that produce value-added products
such as roof and floor trusses, wall panels, stairs, vinyl windows,
custom millwork and pre-hung doors. Builders FirstSource also
distributes dimensional lumber and lumber sheet goods, millwork,
windows, interior and exterior doors, and other building products.
For more information about Builders FirstSource, visit the
Company’s website at www.bldr.com.
About BMC Stock Holdings
With $3.6 billion in 2019 net sales, BMC is one
of the nation’s leading providers of diversified building materials
and solutions to new construction builders and professional
remodelers in the U.S. Headquartered in Raleigh, North
Carolina, the Company's comprehensive portfolio of products and
services spans building materials, including millwork and
structural component manufacturing capabilities, consultative
showrooms and design centers, value-added installation management
and an innovative eBusiness platform. BMC serves 45
metropolitan areas across 18 states, principally in the South and
West regions.
Cautionary Notice Regarding Forward-Looking
Statements
This communication, in addition to historical
information, contains “forward-looking statements” (as defined in
the Securities Litigation Reform Act of 1995) regarding, among
other things, future events or the future financial performance of
Builders FirstSource, Inc. (“Builders FirstSource”) and BMC Stock
Holdings, Inc. (“BMC”). Words such as “may,” “will,” “should,”
“plans,” “estimates,” “predicts,” “potential,” “anticipate,”
“expect,” “project,” “intend,” “believe,” or the negative of these
terms, and words and terms of similar substance used in connection
with any discussion of future plans, actions or events identify
forward-looking statements. Any forward-looking statements involve
risks and uncertainties that are difficult to predict or quantify,
and such risks and uncertainties could cause actual events or
results to differ materially from the events or results described
in the forward-looking statements, including risks, or
uncertainties related to the novel coronavirus disease 2019 (also
known as “COVID-19”) pandemic and its impact on the business
operations of Builders FirstSource and BMC and on local, national
and global economies, the growth strategies of Builders FirstSource
and BMC, fluctuations of commodity prices and prices of the
products of Builders FirstSource and BMC as a result of national
and international economic and other conditions, or the significant
dependence of both companies’ revenues and operating results on,
among other things, the state of the homebuilding industry and
repair and remodeling activity, lumber prices and the economy.
Neither Builders FirstSource nor BMC may succeed in addressing
these and other risks or uncertainties.
Forward-looking statements relating to the
proposed business combination between Builders FirstSource and BMC
include, but are not limited to: statements about the benefits of
the proposed business combination between Builders FirstSource and
BMC, including future financial and operating results; the plans,
objectives, expectations and intentions of Builders FirstSource and
BMC; the expected timing of completion of the proposed business
combination; and other statements relating to the proposed merger
that are not historical facts. Forward-looking statements are based
on information currently available to Builders FirstSource and BMC
and involve estimates, expectations and projections. Investors are
cautioned that all such forward-looking statements are subject to
risks and uncertainties, and important factors could cause actual
events or results to differ materially from those indicated by such
forward-looking statements. With respect to the proposed business
combination between Builders FirstSource and BMC, these factors
could include, but are not limited to: the risk that Builders
FirstSource and BMC may be unable to obtain governmental and
regulatory approvals required for the business combination, or that
required governmental and regulatory approvals may delay the
business combination or result in the imposition of conditions that
could reduce the anticipated benefits from the proposed business
combination or cause the parties to abandon the proposed business
combination; the risk that a condition to closing of the business
combination may not be satisfied, including as a result of the
failure to obtain approval of stockholders of Builders FirstSource
and BMC on the expected terms and schedule or at all; the length of
time necessary to consummate the proposed business combination,
which may be longer than anticipated for various reasons; the risk
that the businesses will not be integrated successfully; the risk
that the cost savings, synergies and growth from the proposed
business combination may not be fully realized or may take longer
to realize than expected; the assumptions on which the parties’
estimates of future results of the combined business have been
based may prove to be incorrect in a number of material ways, which
could result in an inability to realize the expected benefits of
the proposed business combination or exposure to material
liabilities; the diversion of management time on issues related to
the business combination; the effect of future regulatory or
legislative actions on the companies or the industries in which
they operate; the risk that the credit ratings of the combined
company may be different from what the parties expect; economic and
foreign exchange rate volatility; changes in the general economic
environment, or social or political conditions, that could affect
the businesses; the potential effect of the announcement or
consummation of the proposed business combination on relationships
with customers, suppliers, competitors, lenders, landlords,
management and other employees; the ability to attract new
customers and retain existing customers in the manner anticipated
or at all; the ability to hire and retain key personnel; reliance
on and integration of information technology systems; the risks
associated with assumptions the parties make in connection with the
parties’ critical accounting estimates and legal proceedings;
certain restrictions during the pendency of the business
combination that may affect the ability of Builders FirstSource and
BMC to pursue certain business opportunities or strategic
transactions; and the potential of international unrest, economic
downturn or effects of anticipated tax rates, raw material costs or
availability, benefit or retirement plan costs, or other regulatory
compliance costs.
Additional information concerning other risk
factors pertaining to Builders FirstSource and BMC is also
contained in the parties’ respective most recently filed Annual
Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and other information filed with the
Securities and Exchange Commission (the “SEC”). Many of these risks
and uncertainties are beyond Builders FirstSource’s or BMC’s
ability to control or predict. Because of these risks and
uncertainties, you should not place undue reliance on these
forward-looking statements. Furthermore, neither Builders
FirstSource nor BMC undertakes any obligation to update publicly or
revise any forward-looking statements to reflect events or
circumstances that may arise after the date of this communication.
Nothing in this communication is intended, or is to be construed,
as a profit forecast or to be interpreted to mean that the earnings
per share of the common stock of Builders FirstSource or of the
common stock of BMC for the current or any future financial years,
or the earnings per share of the common stock of the combined
company, will necessarily match or exceed the historical published
earnings per share of the common stock of Builders FirstSource or
BMC, as applicable. All subsequent written and oral forward-looking
statements concerning Builders FirstSource, BMC, the proposed
business combination, the combined company or other matters and
attributable to Builders FirstSource, BMC or any person acting on
their behalf are expressly qualified in their entirety by the
cautionary statements above.
Additional Information and Where to Find It
In connection with the proposed business
combination, Builders FirstSource intends to file with the SEC a
registration statement on Form S-4 (the “Registration Statement”)
that will include a prospectus with respect to the shares of common
stock to be issued by Builders FirstSource in the business
combination and a joint proxy statement for Builders FirstSource’s
and BMC’s respective stockholders (the “Joint Proxy Statement”).
Each of Builders FirstSource and BMC will send the Joint Proxy
Statement to its stockholders and may file other documents
regarding the business combination with the SEC. This communication
is not a substitute for the Registration Statement, the Joint Proxy
Statement, or any other document that Builders FirstSource or BMC
may send to its stockholders in connection with the proposed
business combination. This communication is for informational
purposes only and does not constitute, or form a part of, an offer
to sell or the solicitation of an offer to sell or an offer to buy
or the solicitation of an offer to buy any securities, and there
shall be no sale of securities, in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended, and otherwise in accordance
with applicable law. INVESTORS AND SECURITY HOLDERS OF BUILDERS
FIRSTSOURCE AND BMC ARE URGED TO READ THE REGISTRATION STATEMENT,
THE JOINT PROXY STATEMENT, AND ANY OTHER RELEVANT DOCUMENTS
(INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) THAT WILL BE
FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
BUILDERS FIRSTSOURCE, BMC, THE PROPOSED BUSINESS COMBINATION AND
RELATED MATTERS. Investors and security holders of Builders
FirstSource and BMC will be able to obtain free copies of the
Registration Statement, the Joint Proxy Statement, and other
documents (including any amendments or supplements thereto)
containing important information about Builders FirstSource and BMC
once those documents are filed with the SEC, through the website
maintained by the SEC at www.sec.gov. Builders FirstSource and BMC
make available free of charge at investors.bldr.com and
ir.buildwithbmc.com, respectively, copies of materials they file
with, or furnish to, the SEC.
Participants in the Solicitation
Builders FirstSource, BMC, and their respective
directors, executive officers, and other members of management and
employees may be deemed to be participants in the solicitation of
proxies from the stockholders of Builders FirstSource and BMC in
connection with the proposed business combination.
The identity of Builders FirstSource’s directors
and executive officers and their ownership of the common stock of
Builders FirstSource is set forth in Builders FirstSource’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2019,
which was filed with the SEC on February 21, 2020, and its proxy
statement for its 2020 Annual Meeting of Stockholders, which was
filed with the SEC on April 28, 2020.
The identity of BMC’s directors and executive
officers and their ownership of BMC’s common stock is set forth in
BMC’s Annual Report on Form 10-K for the fiscal year ended December
31, 2019, which was filed with the SEC on February 27, 2020, and
its proxy statement for its 2020 Annual Meeting of Stockholders,
which was filed with the SEC on March 27, 2020.
Investors may obtain additional information
regarding the interest of such participants and a description of
their direct and indirect interests, by security holdings or
otherwise, by reading the Registration Statement, the Joint Proxy
Statement, and other materials to be filed with the SEC in
connection with the proposed business combination when they become
available. You may obtain these documents free of charge through
the website maintained by the SEC at www.sec.gov and from the
websites of Builders FirstSource or BMC as described above.
No Offer or Solicitation
This communication is for informational purposes
only and does not constitute, or form a part of, an offer to sell
or the solicitation of an offer to sell or an offer to buy or the
solicitation of an offer to buy any securities of Builders
FirstSource Inc. or any other issuer, and there shall be no sale of
securities, in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended, and otherwise in accordance with applicable law.
Contacts
Builders FirstSource Investors:
Binit SanghviVP Investor Relations 214-765-3804
Builders FirstSource Media:
ICRPhil Denning and Dan
McDermott646-277-1258BLDRPR@icrinc.com
BMC Stock Holdings Investors:
Michael NeeseSVP, Strategy & Investor
Relations 919-431-1796
BMC Stock Holdings Media:
Leigh Parrish / Sharon Stern / Clayton ErwinJoele Frank,
Wilkinson Brimmer Katcher212-355-4449
Source: Builders FirstSource, Inc.
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