BMC and Stock Building Supply Announce Plans To Merge

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Transaction Expected to Result in Annual Synergies of $30 to $40 Million and to Be Accretive to Stock Building Supply’s Earnings per Share in the First Year Following Closing.

RALEIGH, N.C. and ATLANTA, June 3, 2015 (GLOBE NEWSWIRE) — Stock Building Supply Holdings, Inc. (Nasdaq:STCK) (“Stock Building Supply”) and Building Materials Holding Corporation (“BMC”), two leading building materials and solutions providers to professional contractors, today announced the signing of a definitive merger agreement under which the two companies will combine in an all-stock transaction. The combined company is expected to have an implied pro forma enterprise value of $1.5 billion based on Stock Building Supply’s closing price on June 2nd.

The transaction will create a premier provider of lumber, diversified building products and construction services with over $2.7 billion in pro forma 2014 revenues and enhanced product and service offerings. The combined company will have expanded geographic reach in attractive, fast-growing regions across the United States, innovative technology capabilities and deep industry expertise to drive profitable growth and provide leading customer service.

Among the numerous benefits the combined company is expected to bring to all stakeholders include:

  • An enhanced growth, margin and return profile.
  • A strong balance sheet and significant cash flow to support long-term strategic growth in a highly fragmented industry.
  • Significant and achievable synergy potential rising to $30 – $40 million annually within two years.
  • An expanded footprint from 21 to 42 metropolitan areas, principally in the fast-growing South and West regions.
  • A shared deep commitment to providing solutions to customers while delivering a broad range of quality products and services.
  • Projected accretion to Stock Building Supply’s earnings per share in the first full year following close of the transaction.

“We expect this compelling strategic merger will provide significant benefits for customers, shareholders, suppliers and associates of both companies,” said Jeff Rea, President and Chief Executive Officer of Stock Building Supply. “The continuing recovery of the U.S. housing market is expected to generate strong demand for building materials, services and solutions, and together we believe BMC and Stock Building Supply are better positioned to capitalize on this opportunity. Upon close of this transaction, I look forward to continuing on our board to support the combined company and have great faith in the combined leadership team’s ability to create significant shareholder value by accelerating the implementation of our common strategies.”

Peter Alexander, BMC’s Chief Executive Officer, said, “We are very pleased to be uniting two leading companies with complementary strategies, products and services; a shared commitment to superior customer experiences; strong internal performance-based cultures and operations in high-demand geographies. The combination of our two highly complementary platforms will enhance our ability to provide customers with best-in-class products and services across an expanded geographic footprint. We have great respect for what the team at Stock Building Supply has accomplished and upon close of this transaction, I look forward to leading the combined team as we enter the next exciting phase of our transition and the ability to fund our growth.”

Transaction Terms

Under the terms of the agreement, which has been unanimously approved by the Board of Directors of both companies, BMC shareholders will receive 0.5231 newly issued Stock Building Supply shares for each BMC share. Upon the closing of the transaction, BMC shareholders will own approximately 60% of the merged entity, with Stock Building Supply shareholders owning approximately 40%. The transaction is structured to be tax-free to the shareholders of both companies, and is expected to close in the fourth quarter of 2015, subject to approval by both Stock Building Supply and BMC shareholders and typical regulatory clearances.

Funds affiliated with Davidson Kempner Capital Management LP, Ravenswood Investment Management and MFP Partners, L.P., which collectively own approximately 52% of BMC’s outstanding common stock, and funds affiliated with Gores, Stock Building Supply’s largest shareholder, which own approximately 38% of Stock Building Supply’s outstanding common stock, have each agreed to vote in favor of and fully support the transaction.

Proven Leadership Team

Upon closing of the transaction, BMC Chief Executive Officer Peter Alexander will serve as Chief Executive Officer of the combined company and will be a member of the Board of Directors. Jeff Rea, the current Stock Building Supply President and Chief Executive Officer, will remain a member of the Board of Directors of the company. The new leadership team is expected to include representatives of both companies, with current Stock Building Supply Executive Vice President and Chief Financial Officer Jim Major assuming the role of Chief Financial Officer, Stock Building Supply Executive Vice President and Chief Operating Officer Bryan Yeazel assuming the position of Chief Administrative Officer and General Counsel and current BMC Chief Integration Leader Tony Genito leading the integration of the two businesses. In addition to Mr. Alexander and Mr. Rea, the remainder of the combined company’s Board of Directors will be comprised wholly of independent directors, including representatives from each company’s current board. The combined company will be headquartered in Atlanta, GA and will have its main operating center in Raleigh, NC and plans to continue to operate under both the Stock Building Supply and BMC names in their respective local markets.

Mr. Alexander possesses 21 years of experience in the distribution industry. He joined BMC as a director in January 2010 and subsequently was appointed Chief Executive Officer in August 2010. He has led BMC as it has grown into one of the industry-leading providers of residential building products and construction services in fast-growing regions throughout the U.S. Prior to BMC, Mr. Alexander served as President and Chief Executive Officer at ORCO Construction Distribution. He previously served in leadership roles at several companies in the technology, retail/distribution and service industries, including GE Capital, ComputerLand (now Vanstar), Premiere Global Services and Coast to Coast Hardware.

Strategic Benefits

The transaction is expected to result in a combined company that is better positioned to accelerate its growth and deliver significant value to all stakeholders as it continues to accelerate both Stock Building Supply’s and BMC’s existing strategies of capitalizing on expansion opportunities in a fragmented building materials market to strengthen its long-term growth position.

BMC and Stock Building Supply both possess complementary product and service offerings, similar operating principles and a customer service focus that will enable a smooth and efficient integration. The combined company will have a strong position in growth markets across 17 states. Together, the companies will also provide a comprehensive portfolio of building materials, including millwork and structural frame manufacturing capabilities, consultative showrooms and value-added installation management that supports customers’ needs for turnkey solutions. Additionally, BMC’s businesses will provide expanded opportunity to introduce Stock Building Supply’s industry-leading eBusiness platform.

Customers of BMC and Stock Building Supply will continue to experience the same proactive, high-touch service and quality product offerings they have come to rely upon, while receiving the benefits of an expanded product line and stronger technology platform. In addition, the combined company plans to continue to focus on building a high performance, teamwork-driven culture that will offer increased opportunities to its employees as the company accelerates its growth trajectory.

Financing

In connection with the transaction, Stock Building Supply and BMC have received a joint commitment from Wells Fargo Bank, N.A. and Goldman Sachs Bank USA, contingent upon the closing of the transaction, to consolidate and upsize existing revolving Asset Based Loan facilities to $450 million for use by the combined company. Available funds will be used to refinance outstanding balances under the current revolving credit facilities, support up to $75 million in letters of credit, and fund transaction costs, general corporate purposes and working capital. Additionally, $250 million of existing BMC Senior Secured Notes maturing in 2018 are expected to remain outstanding. The closing of the transaction is not subject to financing conditions.

Advisors

Barclays Capital Inc. is serving as financial advisor to Stock Building Supply, with Hunton & Williams LLP serving as legal counsel. Goldman, Sachs & Co. is serving as financial advisor and Kirkland & Ellis LLP is serving as legal counsel to BMC.

Conference Call

Stock Building Supply and BMC will host a conference call today, June 3, 2015 at 9:00 a.m. (Eastern Time) and will simultaneously broadcast it live over the Internet. The conference call can be accessed by dialing 1-877-407-0784 (domestic) or 1-201-689-8560 (international). An investor presentation, to be reviewed during the conference call, can be accessed via Stock Building Supply’s investor relations website at ir.stocksupply.com. A telephonic replay of the conference call will be available immediately after the call and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517. The passcode for the live call and the replay is 13611438. The live webcast and archived replay can be accessed on Stock Building Supply’s investor relations website at ir.stocksupply.com. The online archive of the webcast will be available for approximately 90 days.

Source: http://ir.stocksupply.com