BMC acquires VNS Corporation
Atlanta, Georgia-based BMC has acquired the assets and operations of 14-unit, Vidalia, Georgia-based VNS Corporation.
The move is aimed at expanding BMC's presence and product offerings in the Southeast region of the U.S., as well as build an association with its reputable operations.
"Over the past 68 years, VNS has built a reputation for providing quality products and reliable services," said BMC CEO Peter Alexander. "We are very excited about growing the companies through the combine dstrength of VNS and BMC at our facilities located in Georgia and Florida."
"VNS is excited to join the BMC organization," said VNS president Gary Campbell. "Their values of customer priority, people count, operational excellence, reputation matters and dedicated safety reflect everything we've built since 1947. We look forward to continuing the culture both companies have built while expanding our offerings to our customers in Georgia, the Carolinas, Florida and the Southeast."
BMC maintains 31 lumberyards, 17 truss manufacturing facilities, 22 millwork operations and 3 BMC Design Centers across the U.S.
Meanwhile, VNS provides building materials and services from its 14 locations.
Specific terms of the transaction were not disclosed.
US LBM continues its expansion
Sunrise, Florida-based Rosen Materials and Dayton, New Jersey-based Direct Cabinet Sales are the latest building products companies to join the US LBM family of companies.
The Rosen acquisition increases US LBM’s total wallboard and related specialty product revenue to more than $280 million. Meanwhile, the DCS deal broadens the company's presence and capabilities in the Northeast and Florida cabinetry markets.
Specific terms of the deals were not released.
“We are so pleased to be aligning ourselves with an organization with such an exceptional standing in our industry,” said Drew Rosen, president of Rosen Materials. “We look forward to working with the US LBM team to expand our footprint and product offerings.”
Originally founded in 1996 by Drew Rosen, Rosen Materials supplied South Florida and Las Vegas. It quickly became one of the largest privately held gypsum distributors in South Florida. Today it operates 19 locations across Florida, Georgia, Illinois, Nevada and New Jersey.
“The addition of Rosen continues our strategy to diversify from both a product and geographical perspective,” said L.T. Gibson, president and CEO of US LBM. “Rosen Materials has a proven team which complements the US LBM culture. We look forward to partnering with the Rosen associates to continue on their path of growth and success.”
In addition to gypsum, Rosen’s product mix includes metal framing, sheet goods, kitchens, baths, countertops, stucco, brick, stone, insulation and lumber.
The acquisition of Rosen Materials emphasizes US LBM’s commitment to expansion of its wallboard line, along with other specialty product categories. The company’s $280 annual sales in this area comes from Rosen in addition to Richardson Gypsum, Wallboard Supply Company, Feldman Lumber and American Masons.
The company says it continues to look to acquire more Southern-based distributors and make other partnerships to expand its footprint throughout the United States.
Meanwhile, Direct Cabinet Sales designs, installs and distributes kitchen cabinetry and related products in the Northeast and Florida markets. It operates five showrooms and a distribution center in New Jersey, as well as a showroom in Boca Raton, Florida. The company's founder, Joe DeMussi, will continue in his current role as president, leading day-to-day operations.
"We had several options of who to partner with and strongly feel that US LBM gives us the best opportunity to grow our business, increase our geographical footprint and continue to be the market leader in our industry," DeMussi said, in a prepared statement.
Builders’ Big Deal: Opportunity mixed with debt
Wall Street reacted positively to the Builders FirstSource plan to acquire ProBuild Holdings. Shares of BLDR increased 17% on Tuesday, on top of a 68% gain on Monday.
According to an industry source speaking on background, Warburg Pincus provided financing for the transaction — a $1.63 billion deal — after Fidelity’s Devonshire Investors arm had been shopping around the ProBuild Holdings business to a handful of possible buyers, including other private equity firms.
In the end, it was Dallas-based Builders FirstSource that wrote the press release explaining the benefits of the deal. Those benefits, the company said, include an enhanced product offering, significant cost savings, limited overlapping regional coverage and the opportunity to ride the housing recovery as a diversified national dealer.
Sales at ProBuild were about $4.5 billion in 2014. That’s almost three times the sales at Builders FirstSource — about $1.6 billion.
One observer speaking on background described the deal as a win on multiple levels, as it shows the investment community standing up for the lumber and building material industry “in a very big way.”
Another reason for the industry to welcome the combination of the two pro dealers is the deal’s potential to relieve some of the competitive pressure that have built up in those markets where both banners compete head-to-head. A map of the footprint of the combined companies shows large swaths without any overlap, but some redundancy in Texas, Florida, Tennessee and the mid-Atlantic states.
At last count, Builders had 80 locations, compared to ProBuild's 364 locations.
Some sources expressed concern over the debt involved in the deal. On a pro forma basis, the combine company has net debt of $2.1 billion. The company pointed to a financing plan that included $1.6 billion from new debt.
The debt is big, but so are the cost savings. Builders anticipates $100 million to $120 million annual run-rate cost savings within two years. And the timing, according to Floyd Sherman is right. "Together, we will establish a broader, more efficient platform of manufacturing and distribution capabilities, supported by high-quality service from the best talent in the industry.”
Another industry executive, less optimistic than the first, pointed to “two billion dollars of debt on the balance sheet in an industry that doesn’t like leverage."
In addition to overcoming debt, observers pointed to the standard challenge of cultural and systems integration.
"There is a great opportunity here for Floyd [Sherman] and the team, but it's not one that's going to be easy, and it won't be any more easy with the high level of debt put on the company."
In the meantime, the announcements of job cuts are expected as a matter of course.
"They’re counting on some major synergies and major cost cutting efforts," said the industry source. "There are a lot of people who are going to be left without jobs."
“Wall Street loves it,” another source said. “We’ll see if the customers love it or not.”