After months of back and forth, QXO Inc. (NYSE: QXO), Greenwich, Conn., has agreed to acquire Beacon Roofing Supply Inc. (Nasdaq: BECN), Herndon, Va., for $124.35 per share in cash, or $11 billion.
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Beacon is a distributor of roofing, waterproofing and exterior products, with nearly 600 branches across the U.S. and Canada. QXO says that Beacon has a $55 billion total addressable market.
“Since QXO made its initial offer last November, we have evaluated strategic alternatives to enhance value for all of our shareholders,” said Stuart Randle, Beacon’s chairman. “Following our Board’s comprehensive review, we concluded that this transaction is in the best interests of Beacon and its shareholders given the immediate premium and certainty of value in cash it offers, particularly in an uncertain environment.”
The transaction is expected to close by the end of April. Beacon’s board unanimously recommended that all shareholders tender their shares into the offer.
“We expect Beacon to be the first of many acquisitions, putting us on track toward our intended goal of $50 billion in revenue,” Joe Checkler, senior vice president of communications at QXO, told Distribution Strategy Group. “Beacon is a great company in a large and growing industry, and we’re confident that the same playbook we used in waste management, equipment rental and transportation is completely applicable to Beacon’s business.”
Brad Jacobs leads QXO; before QXO, Jacobs and his teams founded seven companies worth billions of dollars, raising over $40 billion of institutional capital. XPO Inc. and United Rentals Inc. are two of his most successful examples.
At XPO, Checkler said, after acquiring Norbert Dentressangle and Con-way in 2015, they integrated both into a global organization and “doubled each of their profits between 2015 and 2018. We see similar opportunities with Beacon.”
“Acquiring Beacon is a key milestone in our plan to create substantial shareholder value and establish QXO as a leader in the $800 billion building products distribution industry,” Jacobs said.
Checkler said QXO plans to make the company “very big – as quickly as possible.” QXO is targeting $50 billion in annual revenue in a highly fragmented market. “There are plenty of accretive M&A opportunities,” he said.
He outlined why the market is so attractive, using Beacon as the poster child:
- 80% of Beacon’s business is repair and remodeling, which is highly stable, non-discretionary and less cyclical. Replacing a leaking or damaged roof is a necessity, not a decision.
- The average commercial building is over 50 years old, the average home is over 40 years old, and there is a shortage of 4 million homes that need to be built. QXO anticipates ongoing growth in new construction opportunities.
- There’s a “big need for infrastructure repair” across North America and Europe. In North America alone, an additional $2 trillion of spending will be required to keep the infrastructure safe over the next two decades.
What’s next for QXO? According to Checkler, a “massive wall of money” was waiting for an operating asset at QXO like Beacon. “A lot of investors couldn’t participate last summer when we started the company because we didn’t yet have an underlying distribution business,” he said.
