HERNDON, VA and DALLAS, TX -- Beacon Roofing Supply, Inc., the largest publicly-traded distributor of residential and commercial roofing materials and complementary building products in the United States, has entered into a definitive merger agreement to acquire Roofing Supply Group, a leading roofing products distributor owned by investment firm Clayton, Dubilier & Rice, in a cash and stock transaction valued at approximately $1.1 billion.
Under the terms of the agreement, RSG shareholders will receive approximately $286 million in cash and $291 million of Beacon common stock, and Beacon will refinance approximately $565 million of RSG's net debt. Beacon will fund the cash portion of the purchase price through a new ABL Revolver, Term Loan B and a senior unsecured bond offering. The transaction is targeted to close on October 1, 2015.
Headquartered in Dallas, Texas, RSG distributes roofing supplies and related materials from 83 locations across 24 states, including the key Western and Southern markets of California, Florida and Texas. The acquisition also brings Beacon to the Pacific Northwest with branches in Seattle and Spokane. As a result of the acquisition, Beacon will grow to approximately $3.7 billion in revenues and have 356 branches in 45 states and six provinces across Canada. In addition to benefitting from an expanded geographic footprint, Beacon will be able to provide greater customer service through more diversified product offerings across its newly-acquired and existing branches. The transaction is expected to be immediately accretive to adjusted earnings per share ("EPS") and to generate annual run-rate synergies of approximately $50 million. The tax-efficient transaction structure is expected to enable Beacon to retain approximately $130 million in net operating losses, existing intangible deductions of approximately $190 million and transaction-related deductions of approximately $50 million.
Robert R. Buck, Chairman of Beacon's Board of Directors, emphasized the strategic fit of the RSG acquisition and the compatibility of the two companies and stated: "We long have believed that a combination of Beacon and RSG would be tremendously beneficial to our shareholders, customers and employees. RSG complements Beacon geographically, especially in the Southern and Western United States, and RSG's management shares Beacon's belief that success comes from dedication and loyalty to customers and employees. We are pleased that CD&R will become a major shareholder. This is a momentous event for these two great companies and for the future of the roofing distribution industry."
Paul Isabella, Beacon's President and Chief Executive Officer, added: "I am thrilled to welcome RSG to the Beacon family. Our company will benefit greatly by joining forces with RSG's talented and experienced employees who have developed strong and enduring relationships with customers in their local communities. By building on these relationships, Beacon will drive strong growth, bolster our existing customer base and enhance our position across key regions in the South, West and the Pacific Northwest. The acquisition also adds scale to our commercial business and expands our capabilities within our complementary businesses. This acquisition is a milestone in the long and successful history of Beacon."
Peter Arvan, RSG CEO, said: "By joining forces with Beacon, we create a market-leading enterprise with exceptional prospects, bring together two highly experienced and proven management teams, and add capabilities to provide our valued customers with the highest levels of service. It's a great moment for RSG, representing a strong validation of the business the team has built, as well as a compelling opportunity to capitalize on the strengths of both companies."
CD&R Partner Nathan Sleeper said: "We are very excited about this merger and believe that, together, RSG and Beacon will have a very strong foundation for long-term value creation. We look forward to playing a constructive role in helping to realize the full benefits of this strategic combination."