Shares of residential building products suppliers BMC Stock Holdings (NASDAQ: BMCH) and Builders FirstSource (NASDAQ: BLDR) were up as much as 24% and 10%, respectively, early this morning. As of 11 a.m. EDT, BMC remained up 20%, and Builders FirstSource eased back to a 6% gain. The moves follow an announcement today that the two companies have entered into an all-stock merger agreement.
Builders FirstSource is the country's largest supplier of structural building products, while BMC is a more regional supplier in the South and West. The combined companies have over $11 billion in sales.
The all-stock merger will give BMC shareholders 1.3125 shares of Builders FirstSource for each existing share of BMC, resulting in 43% ownership in the combined company. Builders FirstSource shareholders will own 57%.
Upon completion of the merger, current Builders FirstSource CEO Chad Crow will retire, and current BMC CEO Dave Flitman will become CEO of the merged companies.
The merger has been unanimously approved by the boards of both companies. The combination, which will have a presence in 42 states, will be the leading supplier of building materials and services to the residential construction industry.
The companies believe the merger will drive organic growth, as value-added offerings complement each other. BMC's Ready-Frame, a computerized whole-house design solution, combined while Builders FirstSource trusses and manufactured components, will meet the needs of more customers in a more geographically diverse market, the companies said.
The combined company will operate under the name Builders FirstSource Inc., and be headquartered in Dallas, Texas.
10 stocks we like better than Builders FirstSource
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Builders FirstSource wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of August 1, 2020
Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.