HERNDON, Va. — Beacon Roofing Supply, Inc., the largest publicly traded distributor of roofing and complementary building products in North America, announced that the company has entered into a definitive purchase agreement to acquire Allied Building Products Corp., one of the country’s largest exterior and interior building products distributors, from global diversified building products group CRH plc for $2.625 billion in cash.

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

Founded in 1950, Allied is headquartered in East Rutherford, N.J., and distributes products across 208 locations in 31 states. These include exterior products, such as roofing, siding, windows and doors, and interior products, such as wallboard and suspended ceiling systems. 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 6 provinces across Canada. Beacon will also become the fourth largest wallboard and acoustical ceiling tile wholesale distributor in the U.S., 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.

Robert R. Buck, chairman of Beacon’s board of directors, emphasized the strategic rationale of the transaction and 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.”

CD&R Partner Nathan Sleeper commented, “We are excited to participate in the strategic combination of these two industry leaders. We developed a strong confidence in the Beacon Roofing Supply management team during our prior ownership, as they successfully acquired and integrated RSG, and we welcome the opportunity to invest again in Beacon’s future growth and success. I look forward to rejoining Beacon’s Board of Directors and playing a supportive role as the Company realizes the significant value of this transaction.”

In a concurrent press release issued this morning by CRH, Albert Manifold, chief executive officer of CRH, stated, “We are pleased that our long-standing Allied business is being acquired by a highly-respected industry player and we wish our colleagues every success as they enter this new phase of their development.”

Strategic and Financial Benefits of the Transaction

Expanded Exteriors Geographic Footprint: The expanded geographic footprint will provide Beacon a presence in new markets – particularly in New 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.

Significant Customer Service Benefits and Offerings: Customers from both companies are expected to experience multiple benefits working with the combined company, from access to a wider range of products to improved product availability, service, delivery and technology solutions.
Expansion into the Interior Business: The combination will provide Beacon with entry into the adjacent interior business, including wallboard and suspended ceiling products, and will strengthen the combined company’s competitive positioning through extended 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.

Expected Financial Impact: Excluding year one incremental transaction-related amortization of approximately $70-80 million and year one acquisition costs of approximately $65-75 million, Beacon expects the transaction will be immediately accretive to adjusted earnings per share by approximately $0.50-0.60 in year one. Beacon expects the transaction will be accretive to GAAP earnings per share in year two. Following the close, Beacon expects rapid de-levering to result from the anticipated combined EBITDA of the new Beacon entity, realization of cost savings and strong pro forma free cash flow generation. The trailing twelve month June 30, 2017 Adjusted EBITDA of Allied coupled with significant run rate synergies of $110 million results in a transaction purchase multiple of 8.7x.

Financing and Approvals

The transaction is currently expected to close on or around Jan. 2, 2018, 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 fund the purchase price through an upsized ABL revolving credit facility, upsized term loan B facility, a senior unsecured bond offering and by issuing Series A Convertible Preferred Shares to an investment vehicle owned by investment firm CD&R.

Sidley Austin LLP represented Beacon in the acquisition  and related convertible preferred and debt acquisition financing.

The Sidley deal team was led by Jeffrey Smith (Private Equity, Chicago) with assistance from Michael Heinz (Capital Markets, Chicago) and Chris Gleason (Private Equity, Dallas).

Management and Board

Following completion of the transaction, Isabella will continue to serve as president and chief executive officer of the combined company, and Buck will remain chairman of the board of directors. Feury, chief executive officer of Allied, will continue in a key executive leadership role, focused on integration and growth, reporting to Isabella. Philip Knisely, an advisor to the CD&R Funds, will remain on Beacon’s board of directors. Sleeper, a partner at CD&R, will rejoin Beacon’s board of directors.

For more information, visit www.beaconroofingsupply.com.