Kelso & Co to acquire US LBM Holdings
It's official. US LBM Holdings announced on Wednesday afternoon a new ownership deal.
Private equity firm Kelso & Company entered an agreement to purchase a majority of the equity interests in Green Bay, Wisconsin-based US LBM Holdings. BlackEagle Partners LLC and certain members of US LBM will be investors alongside Kelso, according to the announcement.
Terms of the deal were not disclosed. Previous media reports estimated the size of the deal at about $1 billion.
"Our partnership with BlackEagle has led to the creation of a leader in building products distribution," said L.T. Gibson, CEO of US LBM. "We are excited about Kelso's investment in the business and the new partnership between Kelso, BlackEagle and management. We look forward to working with our shareholders to continue to build and grow the company."
US LBM Holdings was the 2013 HBSDealer Pro Dealer of the Year, one of several awards for the collection of leading building material dealers in 22 states. The lumberyard company promotes a philosophy of local management and leadership.
"We are pleased to be partnering with Black Eagle, L.T. and the impressive team at US LBM, both at the corporate level and at the individual business units," said Sandy Osborne, managing director at Kelso. "We are excited to support the company as it continues its growth."
US LBM, which has about 160 locations, has made a flurry of acquisitions in recent months. It has recently acquired Rosen Materials in Florida, Lampert Lumber in Minnesota and New Jersey-based Direct Cabinet Sales.
Michael Madden, managing partner of BlackEagle, said: "We have worked alongside L.T. and his team for six years to build a world-class company, and we look forward to continuing the company's upward trajectory in partnership with Kelso."
BLDR-ProBuild deal moves even closer
Another building block for the Builders FirstSource-ProBuild deal has been laid in place: raising a $100 million in new equity.
The company set the stage for the equity injection on Monday morning, as it announced a public offering of 11 million shares of common stock. It will use the net proceeds, together with borrowings, to finance the acquisition of ProBuild Holdings, the Dallas-based pro dealer said.
During the company’s second-quarter earnings call with investors on Friday, Builders FirstSource executives said the big deal is still on schedule to close at the end of July or the first week of August.
Also during the call, executives touched on some general and specific issues facing LBM dealers, and the new BLDR:
• On labor tightness
According to Builders FirstSource CEO Floyd Sherman, labor tightness is a fact at the construction site, in general. It is “definitely helping drive the component business and other forms of value-added products.”
The company’s salesforce has also done a better job emphasizing products, such as installed millwork and other value-added products.
• On prices
Commodities in the LBM business might take a while to recover to normal heights, he said. “I think hopefully we're going to start seeing some pickup,” Sherman said. “I definitely believe that — and the mills are trying for that.”
• On supply and demand
“It is still a very competitive market,” Sherman said. “And from our standpoint there's still too much supply out there chasing a relatively low level of demand. So while things have gotten better — and as they do get better — it gives a little more opportunity to get a little bit better pricing.
“I feel like there's still a lot of upside to that I think we're going to continue to see as home-building continues to improve.”
• On truss packages
“There are many truss operations out there, and a lot of it is the quality of your service, the dependability of your service, the aggressiveness of your salesforce in getting the business,” said Sherman. “We’re not just a truss manufacturer, and the more you can bundle or package for a builder the more important you become as a supplier.”
Sales up at Builders FirstSource
Dallas-based Builders FirstSource had the kind of second-quarter performance that left CEO Floyd Sherman "extremely pleased." And despite a decline in net income, other stats gave him cause to believe that the company is well positioned in an industry poised to build more houses.
The company reported second-quarter sales of $461.5 million, up 8.2% from the same period last year. Net income of $3.576 million was down from $10.609 million in the second quarter of 2014.
The growth in revenue came despite a negative year-over-year impact from commodity deflation and some abnormally wet weather conditions in the three months ended June 30.
"We believe further operating leverage is possible with continued improvement in the housing market and our increased scale following our acquisition of ProBuild," said Sherman.
As previously reported, the BLDR-ProBuild deal, which was announced on April 13, is expected to close in early August.
Gross margin percentage was 24.0%, up 200 basis points from 22.0% in the second quarter last year. That made this quarter's gross profit margin the highest it's been since the third quarter of 2007.
The company also pointed to the highest quarterly adjusted EBITDA since the third quarter of 2006, when annualized single family starts were more than 1.3 million.
"These results reinforce our belief that we are continuing to benefit from a strengthening housing market and that Builders FirstSource is well-positioned," Sherman said.
Looking ahead, the company sees favorable signs for a large LBM company. Employment gains, consumer confidence, low mortagage rates and the low level of new home inventory all point to growth in construction, Sherman said.
"With the acquisition of ProBuild scheduled to close in August, Builders FirstSource stands ready to benefit from this increase in construction activity as the nation's largest building supply company," he added.