QXO Inc., the buildings products distribution company led by logistics entrepreneur Brad Jacobs, has submitted an unsolicited $5 billion all-cash bid to acquire GMS Inc., a major distributor of specialty building materials.
The offer, detailed in a public letter released Wednesday, proposes $95.20 per share—a roughly 18% premium over GMS’s closing stock price on Tuesday and about 27% above its 60-day trading average, according to data from FactSet. QXO puts the total value of the transaction at $5 billion.
Jacobs said in the letter that QXO has studied GMS for over a year and believes the company is underperforming its peers. “GMS has missed earnings expectations in four of the last five quarters, and margins have compressed more than 300 basis points,” the letter states. Jacobs added that the company’s stock has underperformed the S&P 500 by approximately 1,900 basis points over the past year.
GMS reported quarterly results earlier this week that showed significant pressure from a slowdown in construction activity. For the quarter ending April 30, revenue declined 5.6% year-over-year to $1.33 billion. Net income fell more than 50%, dropping to $26.1 million from $56.4 million a year ago. For the full fiscal year, revenue remained flat at $5.51 billion while net income slid 58% to $115.5 million.
On a conference call with analysts Tuesday, GMS CEO John C. Turner Jr. attributed the downturn to high interest rates and tighter bank lending standards that have delayed residential and commercial construction. Turner cited Gypsum Association data showing a 10% drop in wallboard volumes and said softness spanned both residential and commercial segments. However, he said the company is seeing signs of stabilization in institutional projects such as data centers and hospitals.
The company has launched a $55 million cost-cutting program, with $25 million in savings achieved in the most recent quarter.
QXO argues that GMS is undervalued even after accounting for cyclical weakness. The $95.20 per-share offer is 19% above the median Wall Street analyst target of $80, according to Bloomberg data.
The move follows QXO’s $11 billion acquisition of Beacon Roofing Supply this spring and reflects Jacobs’ strategy to consolidate the fragmented building materials distribution market through digital infrastructure.
GMS acknowledged receipt of the bid late Wednesday and said its board of directors will review the proposal in consultation with financial and legal advisors. The company has not said when it will respond.
