TopBuild to Acquire Specialty Products & Insulation In All-Cash Transaction Valued at $960 Million
27 Juillet 2023 - 10:05PM
TopBuild Corp. (NYSE:BLD), a
leading installer and specialty distributor of insulation and
building material products to the construction industry in the
United States and Canada, has entered into an agreement to acquire
Specialty Products & Insulation (“SPI”) in an all-cash
transaction valued at $960 million. SPI is a portfolio company of
Incline Equity Partners.
For the trailing 12 months ended March 31, 2023,
SPI generated pro forma revenue of approximately $703 million and
adjusted EBITDA of $77 million. Approximately 50% of SPI’s revenue
is recurring and tied to maintenance and repair activity while the
other half is related to new construction activity.
TopBuild plans to fund this $960 million
transaction with a new $550 million Term Loan A and cash on hand.
The Company’s net debt to pro forma adjusted EBITDA is expected to
be approximately 2.0 times, based on March 31, 2023, trailing
twelve months pro forma results. As a result of the transaction,
TopBuild will benefit from a $90 million tax asset.
Robert Buck, President and Chief Executive
Officer of TopBuild, stated, “The acquisition of SPI is highly
strategic for TopBuild, accelerating Specialty Distribution’s
growth and enhancing our leadership position in the very diverse
and fragmented insulation industry. SPI has a broad customer base,
an experienced and talented operating team, and a fabrication
footprint complementary to our current mechanical insulation
business. In addition, SPI generates significant recurring revenue
from industrial maintenance and repair. When combined with our
Specialty Distribution business today, we estimate recurring
revenue will account for approximately one third of the segment’s
overall revenue stream.”
Compelling Strategic Opportunity with a
Clear Path to Financial Value Creation
- Brings
together two leading specialty distributors to further
promote innovation and deliver best-in-class customer
experiences.
-
Reinforces position as a leading Specialty Distributor and
enables multiple avenues for growth across the three
highly fragmented insulation end markets we serve: Residential,
Commercial Building, and Commercial/Industrial Mechanical.
- Further
differentiates TopBuild’s unique operating model and reduces
cyclicality by increasing recurring revenue stream.
- Provides
opportunities to drive operational efficiencies throughout
the Specialty Distribution segment.
- Enhances financial profile
through revenue growth and synergy realization, with
expected annual run rate cost synergies between $35 and $40 million
within two years following the close of the transaction.
Ray Sears, President and Chief Executive Officer
of SPI, stated, “We are very pleased to announce this transaction
with TopBuild. This will be a tremendous benefit for our customers
as the combined organization will be even better positioned to
provide them with innovative and high-quality solutions. Both
companies have similar corporate cultures with an emphasis on
safety, respect, and a continued drive to improve.”
In conclusion Buck noted, “The identification
and integration of acquisitions is a TopBuild core competency, as
evidenced by our successful M&A track record and the tremendous
value we have created for our stakeholders. We are confident SPI
will be another outstanding addition to our Company and we look
forward to welcoming the SPI team to TopBuild.”
The transaction, which has been approved by
TopBuild’s Board of Directors, is subject to customary closing
conditions, including expiration or termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
Founded in 1982 and headquartered in Charlotte,
NC, SPI is a leading specialty distributor of mechanical insulation
solutions for the industrial and commercial end-markets. SPI has 85
branches across the United States and 4 branches in Canada.
Guggenheim Securities, LLC and J.P. Morgan
Securities LLC are serving as financial advisors to TopBuild, and
Jones Day is acting as legal counsel. Piper Sandler is serving as
financial advisor to SPI, and Kirkland and Ellis LLP is acting as
legal counsel.
Webcast
A webcast to discuss the SPI transaction is
scheduled for today, July 27, at 4:30 p.m. Eastern Time. The
webcast can be accessed on the Company’s website at
www.topbuild.com or by using the link below.
Webcast | TopBuild Conference Call
(choruscall.com)
A dial in number for the webcast is also
available: (877) 407-9037. A copy of the investor presentation will
be available on the Company’s website when the call commences.
About TopBuildTopBuild Corp.,
headquartered in Daytona Beach, Florida, is a leading installer and
specialty distributor of insulation and related building material
products to the construction industry in the United States and
Canada. We provide insulation installation services nationwide
through our Installation segment which has approximately 235
branches located across the United States. We distribute building
and mechanical insulation, insulation accessories and other
building product materials for the residential, commercial, and
industrial end markets through our Specialty Distribution business.
Our Specialty Distribution network encompasses approximately 170
branches. To learn more about TopBuild please visit our website at
www.topbuild.com.
Safe Harbor Statement
This press release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act. These forward-looking statements may address,
among other things, our expected financial and operational results
and the related assumptions underlying our expected
results. These forward-looking statements are distinguished by
use of words such as “will,” “would,” “anticipate,” “expect,”
“believe,” “designed,” “plan,” or “intend,” the negative of these
terms, and similar references to future periods. These views
involve risks and uncertainties that are difficult to predict and,
accordingly, our actual results may differ materially from the
results discussed in our forward-looking statements. Our
forward-looking statements contained herein speak only as of the
date of this press release. For us, particular uncertainties
that could cause our actual results to be materially different from
those expressed in our forward-looking statements include, without
limitation, our ability to successfully complete the proposed
acquisition of SPI, including satisfying closing conditions; any
delay in closing the proposed acquisition of SPI; the occurrence of
any event that could give rise to termination of the purchase
agreement governing the acquisition of SPI; risks inherent in the
achievement of cost synergies and the timing thereof; risks related
to the disruption to us and SPI and their respective management as
a result of the proposed acquisition; the effect of the
announcement of the proposed acquisition on SPI’s ability to retain
and hire key personnel and maintain relationships with clients,
suppliers and other third parties; our ability to successfully
integrate SPI if the proposed acquisition is completed, including
whether and to what extent the proposed acquisition will be
accretive within the expected timeframe; and those described in the
risk factors contained in our filings with the Securities and
Exchange Commission. Although TopBuild believes the
expectations reflected in such forward-looking statements are based
on reasonable assumptions, the Company can give no assurance that
its expectations will be achieved and it undertakes no obligation
to update publicly any forward-looking statements as a result of
new information, future events, or otherwise, except as required by
applicable law.
Investor Relations and Media
ContactTabitha
Zanetabitha.zane@topbuild.com386-763-8801
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TopBuild Corp. |
Reconciliation of Pro Forma Non-GAAP Measures to GAAP
Measures (Unaudited) |
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
Trailing Twelve Months Ended March 31, 2023 |
Net sales |
|
$ |
5,105,064 |
|
Pro forma acquisition sales (a) |
|
|
861,090 |
|
Pro forma sales |
|
$ |
5,966,154 |
|
|
|
|
|
Net income, as reported |
|
$ |
577,148 |
|
Adjustments to arrive at EBITDA, as adjusted: |
|
|
|
Interest expense and other, net |
|
|
59,862 |
|
Income tax expense |
|
|
195,630 |
|
Depreciation and amortization |
|
|
124,936 |
|
Share-based compensation |
|
|
11,717 |
|
Rationalization charges |
|
|
(645 |
) |
Acquisition related costs |
|
|
8,558 |
|
EBITDA, as adjusted |
|
$ |
977,206 |
|
Pro forma acquisition EBITDA (a) |
|
|
96,515 |
|
Pro forma EBITDA, as adjusted |
|
$ |
1,073,721 |
|
|
|
|
|
Total debt |
|
$ |
1,464,937 |
|
Pro forma acquisition debt funding (b) |
|
|
550,000 |
|
Pro forma total debt |
|
$ |
2,014,937 |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
333,778 |
|
Pro forma acquisition cash funding (c) |
|
|
(505,000 |
) |
Pro forma cash and cash equivalents |
|
$ |
(171,222 |
) |
|
|
|
|
Pro forma net debt leverage ratio |
|
|
2.0 |
|
|
|
|
|
(a) Represents the trailing twelve months proforma impact of SRI
and Best Insulation acquisitions as well as our definitive
agreement to acquire SPI. |
(b) Represents the trailing twelve months proforma impact from our
definitive agreement to acquire SPI. |
(c) Represents the trailing twelve months proforma impact of Best
Insulation acquisition and our definitive agreement to acquire
SPI. |
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