Combined Company Expected to Generate Approximately $3.7 Billion in
Revenue Across 356 Locations
Significantly Expands Beacon's Geographic Footprint in Southern and
Western United States
$50 Million in Expected Annual Run-Rate Synergies
Immediately Accretive to Adjusted EPS and Provides Significant Tax
Attributes
HERNDON, Va. and DALLAS, Tx.--(BUSINESS WIRE)--
Beacon Roofing Supply, Inc. (Nasdaq: BECN) ("Beacon"), the largest
publicly-traded distributor of residential and commercial roofing
materials and complementary building products in the United States,
today announced that it has entered into a definitive merger agreement
to acquire Roofing Supply Group ("RSG"), a leading roofing products
distributor owned by investment firm Clayton, Dubilier & Rice ("CD&R"),
in a cash and stock transaction valued at approximately $1.1 billion.
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Under the terms of the agreement, RSG shareholders will receive
approximately $286 million in cash and $291 million of Beacon common
stock, and Beacon will refinance approximately $565 million of RSG's net
debt. Beacon will fund the cash portion of the purchase price through a
new ABL Revolver, Term Loan B and a senior unsecured bond offering. The
transaction is targeted to close on October 1, 2015.
Headquartered in Dallas, Texas, RSG distributes roofing supplies and
related materials from 83 locations across 24 states, including the key
Western and Southern markets of California, Florida and Texas. The
acquisition also brings Beacon to the Pacific Northwest with branches in
Seattle and Spokane. As a result of the acquisition, Beacon will grow to
approximately $3.7 billion in revenues and have 356 branches in 45
states and six provinces across Canada. In addition to benefitting from
an expanded geographic footprint, Beacon will be able to provide greater
customer service through more diversified product offerings across its
newly-acquired and existing branches. The transaction is expected to be
immediately accretive to adjusted earnings per share ("EPS") and to
generate annual run-rate synergies of approximately $50 million. The
tax-efficient transaction structure is expected to enable Beacon to
retain approximately $130 million in net operating losses, existing
intangible deductions of approximately $190 million and
transaction-related deductions of approximately $50 million.
Robert R. Buck, Chairman of Beacon's Board of Directors, emphasized the
strategic fit of the RSG acquisition and the compatibility of the two
companies and stated: "We long have believed that a combination of
Beacon and RSG would be tremendously beneficial to our shareholders,
customers and employees. RSG complements Beacon geographically,
especially in the Southern and Western United States, and RSG's
management shares Beacon's belief that success comes from dedication and
loyalty to customers and employees. We are pleased that CD&R will become
a major shareholder. This is a momentous event for these two great
companies and for the future of the roofing distribution industry."
Paul Isabella, Beacon's President and Chief Executive Officer, added: "I
am thrilled to welcome RSG to the Beacon family. Our company will
benefit greatly by joining forces with RSG's talented and experienced
employees who have developed strong and enduring relationships with
customers in their local communities. By building on these
relationships, Beacon will drive strong growth, bolster our existing
customer base and enhance our position across key regions in the South,
West and the Pacific Northwest. The acquisition also adds scale to our
commercial business and expands our capabilities within our
complementary businesses. This acquisition is a milestone in the long
and successful history of Beacon."
Peter Arvan, RSG CEO, said: "By joining forces with Beacon, we create a
market-leading enterprise with exceptional prospects, bring together two
highly experienced and proven management teams, and add capabilities to
provide our valued customers with the highest levels of service. It's a
great moment for RSG, representing a strong validation of the business
the team has built, as well as a compelling opportunity to capitalize on
the strengths of both companies."
CD&R Partner Nathan Sleeper said: "We are very excited about this merger
and believe that, together, RSG and Beacon will have a very strong
foundation for long-term value creation. We look forward to playing a
constructive role in helping to realize the full benefits of this
strategic combination."
Strategic and Financial Benefits of the Transaction
-
Expanded Geographic Footprint: The combined company will
operate 356 locations with an expanded distribution platform that
affords greater access to the less seasonally-sensitive Southern and
Western U.S markets. The acquisition also provides Beacon with an
entry into the Pacific Northwest, as well as additional branches in
highly attractive, dense markets including California, Florida and
Texas.
-
Greater Product Diversification and Customer Service: The
transaction strengthens Beacon's position as the largest public
roofing materials and related products distributor in the U.S. with
revenues of approximately $3.7 billion. Beacon will be
better-positioned to serve existing and new customers with a larger
fleet for deliveries and service readiness, greater scale of
residential and commercial business, increased offering of
complementary building products across RSG's locations, enhanced
engineering capabilities, and greater financial resources to develop
and implement new customer service initiatives, such as e-commerce.
-
Aligned Growth Strategies: Both Beacon and RSG employ
"Greenfield" growth strategies to expand branch count and geographical
reach, and the respective organizations have benefited from this
strategy. In total, the companies have opened 72 Greenfields since
2012, which will contribute to an enhanced organic growth rate in
future years. Both companies have grown through a similar approach to
acquisitions and a focus on consistent improvement in organic growth.
-
Immediately Accretive to Beacon's Adjusted Earnings per Share: Beacon
expects the acquisition of RSG will be immediately accretive to
adjusted earnings per share and meaningfully more accretive thereafter.
-
Significant Cost Synergies Expected: Beacon's acquisition of
RSG is expected to generate approximately $50 million in annual
run-rate synergies. Run-rate cost savings represent approximately four
percent of RSG's 2015 sales and are consistent with similar industry
mergers.
-
Tax-Efficient Structure: The acquisition, which is being
structured as a reorganization to achieve optimal tax treatment, is
expected to enable the combined company to retain all advantageous tax
attributes associated with RSG, including approximately $130 million
in net operating losses, existing intangible deductions of
approximately $190 million and transaction-related deductions of
approximately $50 million.
-
Strong Financial Profile: The combined company will enjoy ample
liquidity, with approximately $350 million of available capital.
Following the close, rapid de-levering is expected to result from the
realization of cost savings, earnings expansion, strong cash flow
generation and low ongoing capital expenditures. The capital structure
will take advantage of the current low interest rate environment and
establish a low weighted average cost of debt.
Financing and Approvals
The transaction is targeted to close on October 1, 2015 and is subject
to 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.
Beacon will finance the transaction with a new ABL Revolver, Term Loan B
and a senior unsecured bond offering.
Management and Board
Following completion of the transaction, Mr. Isabella will continue to
serve as President and Chief Executive Officer of the combined company,
and Mr. Buck will remain Chairman of the Board of Directors. Mr. Arvan
will continue to manage the RSG business and report to Mr. Isabella.
Philip Knisely, Chairman of RSG and an Advisor to CD&R Funds, and Mr.
Sleeper will join the Board of Directors.
Advisors
Citi is serving as financial advisor to Beacon and Sidley Austin LLP and
Schiff Hardin LLP are serving as its legal advisors. Deutsche Bank
Securities Inc. and Goldman, Sachs & Co. acted as financial advisors to
RSG, and Debevoise & Plimpton LLP is serving as legal advisor to RSG.
Citi and Wells Fargo are acting as Joint Lead Arrangers on the debt
financing.
Conference Call and Presentation
Beacon will host a conference call to discuss the transaction today,
July 27, 2015, at 8:00 a.m. Eastern Daylight Time (EDT). The live
webcast of the call, along with a webcast replay after the call, can be
accessed at http://ir.beaconroofingsupply.com/events.cfm
(the "Events & Presentations" page of the "Investor Relations" section
of the Company's web site). There will be a slide presentation available
on that page of the website as well. For those unable to connect to the
Internet or who may wish to ask questions, the conference call dial-in
number is 844-298-9821 (toll-free) or 234-386-2869 (international). To
assure timely access, call participants should call in before 8:00 a.m.
EDT.
About Beacon Roofing Supply, Inc.
Founded in 1928, Beacon Roofing Supply, Inc. (NASDAQ: BECN) is the
largest publicly traded distributor of residential and commercial
roofing materials and complementary building products, operating 273
branches throughout 42 states in the U.S. and six provinces in Canada.
In fiscal 2014, Beacon had sales of $2.3 billion. The company employs
more than 3,000 associates. To learn more about Beacon and its family of
regional brands, please visit www.becn.com.
About Roofing Supply Group
A portfolio company of Clayton, Dubilier & Rice, LLC, Roofing Supply
Group, LLC ("RSG") is headquartered in Dallas, Texas, and is one of the
largest wholesale distributors of roofing supplies and related materials
in the United States. Through its network of more than 83 locations in
24 states nationwide, RSG provides one-step distribution services from
roofing product manufacturers to roofing contractors and homebuilders.
Each branch carries a complete line of roofing products for residential
and commercial roofing, including composition asphalt shingles,
underlayment and associated ancillary products.
About Clayton, Dubilier & Rice
Founded in 1978, Clayton, Dubilier & Rice is an investment firm with a
strategy predicated on producing financial returns through building
stronger, more profitable businesses. Since inception, CD&R has managed
the investment of more than $21 billion in 65 businesses with an
aggregate transaction value of approximately $100 billion. To learn more
about CD&R, please visit www.cdr-inc.com.
Forward-Looking Statements
This release contains information about management's view of Beacon's
future expectations, plans and prospects that constitute forward-looking
statements for purposes of the safe harbor provisions under the Private
Securities Litigation Reform Act of 1995. Actual results may differ
materially from those indicated by such forward-looking statements as a
result of various important factors, including, but not limited to,
those set forth in the "Risk Factors" section of Beacon's latest Form
10-K. In addition, numerous factors could cause actual results with
respect to the proposed transaction to differ materially from those in
the forward-looking statements, including without limitation, the
possibility that the expected synergies, cost savings and tax
efficiencies from the proposed transaction will not be realized, or will
not be realized within the expected time period; the risk that the
Beacon and RSG businesses will not be integrated successfully; the
ability to obtain governmental approvals of the proposed transaction on
the proposed terms and schedule contemplated by the parties; disruption
from the proposed transaction making it more difficult to maintain
business and operational relationships; the risk of customer attrition;
the possibility that the proposed transaction does not close, including,
but not limited to, due to the failure to satisfy the closing
conditions; and the ability to obtain the debt financing contemplated to
fund the cash portion of the transaction consideration and the terms of
such financing. The forward-looking statements included in this press
release represent Beacon's views as of the date of this press release
and these views could change. However, while Beacon may elect to update
these forward-looking statements at some point, Beacon specifically
disclaims any obligation to do so, other than as required by federal
securities laws. These forward-looking statements should not be relied
upon as representing Beacon's views as of any date subsequent to the
date of this press release.
This release does not constitute an offer of any securities for sale.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150727005569/en/
Beacon Roofing Supply
Joseph Nowicki, 571-323-3940
Executive
Vice President & Chief Financial Officer
jnowicki@becn.com
or
Roofing
Supply Group
Troy Draper, 214-956-5147
or
CD&R
Tom
Franco / Dan Jacobs, 212-407-5200
or
Media
Joele Frank,
Wilkinson Brimmer Katcher
Nick Lamplough, 212-355-4449
Source: Beacon Roofing Supply, Inc.
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