Beacon Roofing Supply Completes Acquisition of Allied Building Products

Beacon Roofing Supply Inc. announced the successful completion of its previously announced acquisition of Allied Building Products Corp. from global diversified building products group CRH plc. Completion of the Allied acquisition further strengthens Beacon’s position as one of the largest publicly traded wholesale building materials distributors in the United States and Canada, notes the company, with approximately $7 billion in revenue and 589 branches throughout all 50 states and 6 provinces in Canada.

According to the company, Beacon also becomes the fourth largest wallboard and acoustical ceiling tile wholesale distributor in the United States, with more than $1 billion of revenue in the interior market category. The Allied acquisition also significantly expands Beacon’s geographic footprint in New York, New Jersey, the Upper Midwest and other major U.S. markets.

Paul Isabella, president and CEO of Beacon, stated, “We are pleased to announce the completion of the Allied acquisition and we look forward to the successful integration of these two great companies. Beacon and Allied’s leadership have worked closely together on the integration planning to ensure a collaborative approach and an outcome that preserves the expertise and strengths of both organizations. I want to thank the Beacon and Allied teams for their tireless work and cooperation to successfully complete the financing and closing processes efficiently and on schedule. This combination is about driving growth through the expansion of our geographic footprint and range of products and creating increased value for our customers and shareholders. This is a milestone day in the long and successful histories of both companies and we are thrilled to start the new year as one company.”

In connection with the Allied acquisition, a fund managed by Clayton, Dubilier & Rice (CD&R), invested $400 million in Beacon and Nathan Sleeper, a CD&R partner, was appointed to Beacon’s Board of Directors, effective immediately. Sleeper previously was a member of Beacon’s Board of Directors from October 2015 through May 2016 in connection with Beacon’s previous acquisition of Roofing Supply Group (RSG) from a fund managed by CD&R.

Robert R. Buck, chairman of Beacon’s Board of Directors, added, “Together, Beacon and Allied will have more than 150 years of combined experience providing service excellence in the building products industry. Having this unique opportunity to combine two great companies of this magnitude is a testament to the dedication and hard work of the people across both organizations. I also am pleased to welcome Nate Sleeper back to our Board of Directors. His deep industrial sector expertise and leadership will prove to be extremely valuable as we continue moving our growth strategy forward.”

According to the company, the Allied acquisition provides significant strategic and financial benefits:

  • Expanded exteriors geographic footprint:The expanded geographic footprint provides Beacon a presence in new markets — particularly inNew York, New Jersey and the Upper Midwest. With this transaction, Beacon will operate locations in all 50 states and will expand its presence in other key markets including Texas, Florida, Colorado and California.
  • Expansion into the interior business:The combination provides Beacon with entry into the adjacent interior business, including wallboard and suspended ceiling products, and strengthens the combined company’s competitive positioning through extended product offerings. The interior category shares many attractive investment qualities and characteristics with the roofing products distribution business.
  • Enhanced growth strategies:Beacon remains committed to increasing market share through organic growth focusing on a wide range of roofing and complementary products. Through the combination, Beacon will be well-positioned to leverage Allied’s various market advantages, including its established private-label business and robust e-commerce platform, to further Beacon’s organic growth strategies.
  • Significant cost synergies expected:The combined company is expected to realize$110 million in annual run-rate synergies within two years of closing.

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Beacon Roofing Supply to Acquire Allied Building Products

Beacon Roofing Supply Inc. announced that the company has entered into an agreement to acquire Allied Building Products Corp. Beacon will purchase Allied from global diversified building products group CRH for $2.625 billion in cash.

Headquartered in Herndon, Va., Beacon is a distributor of residential and non-residential roofing and complementary building products, and the company currently has more than 380 locations in 48 states and six Canadian provinces.

Allied is headquartered in East Rutherford, N.J., and distributes products across 208 locations in 31 states. The company distributes exterior products, such as roofing, siding, windows and doors, and interior products, such as wallboard and suspended ceiling systems.

According to Beacon, 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 $7 billion and 593 branches in all 50 states and six provinces across Canada.

Beacon will also become the fourth largest wallboard and acoustical ceiling tile wholesale distributor in the United States, with more than $1 billion of revenue in the interior market category. Beacon and Allied have more than 150 years of combined experience providing service excellence to customers in the building products industry.

The expanded geographic footprint will allow Beacon to enter new local markets, particularly in New York, New Jersey and the upper Midwest. In addition, acquiring Allied allows Beacon to further strengthen the company’s position as a leader in roofing products distribution, while accelerating growth in other key product categories, including siding, windows, doors, decking, trim, waterproofing, insulation and solar.

Beacon expects to finance the acquisition with approximately $2.2 billion of debt financing, a new unsecured note and approximately $500 million of committed convertible preferred equity financing from an entity affiliated with the investment firm Clayton, Dubilier & Rice (CD&R), which in October 2015 sold Roofing Supply Group (RSG) to Beacon. The parties currently expect to consummate the transaction on or around January 2, 2018, subject to satisfaction of customary closing conditions.

Robert R. Buck, chairman of Beacon’s board of directors, stated: “Allied is among the most established and respected companies in our industry, and we are proud that, through this acquisition, Beacon will become one of North America’s largest publicly traded building materials distributors and will operate locations in all 50 states. I want to thank CRH for entrusting Beacon with the future success of Allied and its dedicated employees, who have been part of the CRH family for more than 20 years. The Allied acquisition also presents a great opportunity for CD&R to again become a major shareholder in Beacon. Today is of great significance in Beacon’s history and for the future of building products distribution.”

Paul Isabella, Beacon’s president and chief executive officer, commented: “I would like to welcome the more than 3,500 employees from Allied to the Beacon family. We are thrilled to partner with such a loyal and dedicated workforce that shares our commitment to superior customer service and high levels of performance. We are also excited to become a significant player in the robust, growing and still-consolidating interior products market. Together, we will leverage the strengths of both companies, while remaining committed to preserving the deep customer relationships that we have each cultivated over 150 years of combined experience. This is a milestone moment in the long and successful histories of both companies.”

Beacon Roofing Supply Achieves Growth in Its First Quarter

Beacon Roofing Supply Inc. has announced results for its first quarter ended Dec. 31, 2014, of the fiscal year ended September 30, 2014.

Paul Isabella, the company’s president and CEO, states: “We again achieved solid top line growth for the quarter. We started the quarter exceptionally strong, but ended the month of December on a soft note as a result of some very challenging weather conditions in our Northern regions. We were very pleased to see a strong rebound in commercial roofing this quarter as we continue to focus on diversifying our lines of business. In addition, we are seeing success with our new branch opening process and believe we will exceed our initial targets and may open as many as 25 branches in Fiscal 2014. A challenging pricing environment continued to drive down gross margins again this quarter, although our long standing culture of cost control was able to mitigate some of the negative impact through leverage of our operating expenses. Despite the challenges with pricing, we continued to generate solid cash flows from operations and fully repaid our revolving credit facility during the quarter. We believe market pricing will improve in 2014 as demand increases as we exit the winter months, and we intend to continue to leverage our operating expenses as we grow our revenue base.”

Total sales increased 7.5 percent to $552.1 million in 2014 from $513.7 million in 2013. Existing market (organic) sales, which exclude branches acquired after the beginning of last year’s first quarter, increased 3.3 percent (the first quarter of 2013 and 2014 both had the same number of business days). In existing markets, residential roofing product sales increased 1.4 percent, non-residential roofing product sales increased 6.6 percent, and complementary product sales increased 1 percent.

Net income for the first quarter was $15.0 million compared to $18.2 million in 2013. First quarter diluted net income per share was $0.30 compared to $0.37 in 2013. Net income for the quarter was unfavorably impacted by lower gross margins driven primarily by lower average selling prices for our residential and non-residential products and a higher mix of non-residential roofing products. This was partially offset by a lower rate of operating expenses and lower effective tax rate.

Earnings before interest, taxes, depreciation and amortization, and stock-based compensation (Adjusted EBITDA), which are reconciled to the net income in this press release, were $37.5 million in 2014 compared to $41.8 million in 2013, a decrease of 10.4 percent driven primarily by the lower net income.

Cash-flow from operations was $54.2 million in 2014 compared to $47.3 million in 2013. This increase in operating cash flows was influenced mostly by a larger benefit from net working capital changes this year. Cash on hand increased by $22.4 million to $56.4 million at December 31, 2013, compared to $34.0 million at December 31, 2012. This increase was due primarily to a reduction in cash used for investing activities in 2014, compared to 2013. As of December 31, 2013, we had available borrowings under our revolving lines of credit of $332.1 million.