Beacon Roofing Supply, Inc.
) has completed the purchase of Structural Materials, Co., a
distributor of residential and commercial roofing products and
related accessories. The financial terms of the deal were
BEACON ROOFING (BECN): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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California-based Structural Materials distributes residential and
commercial roofing products and related accessories. The company
operates through six locations in Los Angeles and Orange Counties
and the neighboring areas and generated nearly $81 million revenues
The strategic acquisition will augment the existing product
portfolio of Beacon Roofing in the lines of roofing products as
well as related accessories. Moreover, Beacon Roofing will get the
opportunity to fortify its customer base by catering to the
potential markets of South California.
The purchase was also in line with Beacon Roofing's strategy to
acquire leaders in the potential markets. Earlier, in May 2012,
Beacon Roofing acquired the leading wholesale distributor of
building products, Cassady Pierce Company.
The acquisition of Cassady Pierce expanded the business of Beacon
Roofing in the unexplored regions of Pennsylvania, in addition to
bracing up its building materials product portfolio.
Beacon Roofing has recently entered into a new five-year senior
secured credit facility that includes a $550 million U.S. credit
facility and a C$15 million ($15.1 million) Canadian credit
facility with Wells Fargo Bank, National Association, an unit of
Wells Fargo & Company
The new credit facility refinanced the company's prior $515 million
credit facilities that were provided through GE Antares and an
affiliate. The interest rates of the new credit facility are at
historically low levels. It provides an attractive LIBOR margin
pricing, low interest rates, reasonable financial covenants, as
well as substantial liquidity and financial flexibility for the
company to pursue acquisitions and growth opportunities.
Beacon Roofing's growth strategy largely depends on acquisitions,
the primary growth driver since its inception. The company,
therefore, faces challenges from acquisition related risks. For
instance, management may have trouble finding suitable acquisition
candidates that provide synergies in existing markets and upfront
Beacon Roofing retains a short-term Zacks #1 Rank (Strong Buy). We
have a long-term Neutral recommendation on the stock.