Beacon announced it had reached a deal with Clayton, Dubilier & Rice, LLC, to repurchase all outstanding shares of its Series A Cumulative Convertible Participating Preferred Stock held by CD&R’s affiliate. 

Beacon also offered a preview of its latest quarterly earnings ahead of an official release on August 3, after the markets close, according to a news release on July 7, 2023.

400K 'Series A Preferred Stock' Shares Repatriated

The 400,000 outstanding shares of Series A Preferred Stock will be repurchased from CD&R for an aggregate amount equal to $804.5 million plus aggregate accrued and unpaid dividends as of the repurchase date. The company said the transaction is expected to be financed by a mix of new and existing debt funding and cash on hand, with the closing of the transaction to occur no later than August 11, 2023.

Beacon said its board of directors evaluated and approved the transaction based on the recommendation of a special transaction committee composed solely of disinterested directors. The transaction is expected to provide substantial benefits to Beacon and its common stockholders, including:

  • Reducing diluted share count on an as-converted basis by 9.69 million shares;
  • Providing immediate accretion to earnings per share;
  • Eliminating preferred dividends of $24.0 million per year and; 
  • Simplifying Beacon’s capital structure.

After the transaction, Beacon noted that CD&R will continue to own the 15.2 million shares of common stock it directly holds. As of June 30, 2023, 63.4 million shares of common stock were outstanding, exclusive of customary dilutive elements.

Upon closing of the repurchase, Nathan Sleeper, CD&R’s CEO and one of its representatives on Beacon’s board of directors, will resign his seat; Philip Knisely, an operating partner of CD&R and a second representative of the concern on Beacon’s board, will retain his seat but will step down as Beacon’s non-executive board chair. Stuart Randle, Beacon’s lead independent director, will be named non-executive board chair following the closing of the repurchase.

“This transaction marks an important milestone for our Company and our stockholders,” said Julian Francis, Beacon’s president and CEO. “This transaction further positions us to execute on our strategic priorities and Ambition 2025 financial targets to create value for our customers, stockholders, employees, and other stakeholders.”

J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC served as financial advisors to Beacon in connection with the transaction, and Sidley Austin LLP and Squire Patton Boggs LLP served as the firm’s legal advisors. Debevoise & Plimpton LLP served as CD&R’s legal advisor.

“The transaction represents yet another step in Beacon’s evolution, enhancing stockholder value, increasing independent corporate governance and simplifying our capital structure,” said Randle, Beacon’s lead independent director and chair-elect. “We thank [Sleeper] for his service as a valued board member over the last five years and look forward to working with Phil as he continues his directorship.”

Preliminary Results for Second Quarter 2023 and 2023 Outlook Update

Net sales for the quarter ended June 30, 2023, are expected to be approximately $2.5 billion. Gross margins are expected to be approximately 25.4%. Net income for the second quarter ended is estimated to range between $147 and $154 million. 

Diluted net income per share is expected to range between $1.88 and $1.97 per share. Adjusted EBITDA for the quarter is estimated to range between $280 and $290 million. The company plans to announce final earnings results for the quarter after market close on August 3.

Beacon said it now expects full-year 2023 Adjusted EBITDA results to range between $840 and $870 million, which represents the upper half of its previously announced guidance range. The concern said it expects to further refine this guidance in connection with its second-quarter earnings release, reflecting, among other things, the completion of quarter-end close procedures, its performance in July 2023, expectations with respect to recently announced shingle price increases, assessment of macroeconomic conditions and interest rates, as well as the forecast for the second half of the year.

After closing the buyback transaction, Beacon said it does not expect significant open market repurchases of its common stock during the remainder of 2023 under the existing stock repurchase authorization.

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