MERGERMARKET: Stock Building Supply Targets More Acquisitions After NHC Bid, Appointing BMHC’S ex-CEO to Board, Chairman says
March 2, 2010
Stock Building Supply expects more acquisitions in 2010 after agreeing to buy one lumber dealer out of bankruptcy and adding the former CEO of another one to its board, said Chairman Tim Meyer.
The Raleigh, North Carolina-based lumber dealer agreed on 26 February to be the 'stalking horse' bidder for substantially all the assets of National Home Centers (NHC), a building materials supplier in Arkansas with USD 100m-USD 125m in revenues. Stock also announced on 1 March that Robert Mellor, former chairman and CEO of Building Materials Holding Corp (BMHC), had joined its board of directors to help expansion.
“The restructuring and the cost takeout is largely done. In 2010, we’re focused on profitable growth,” said Meyer, who is also managing director at The Gores Group, 51% owner of Stock.
Stock's acquisition of NHC will give Stock a new presence in Northwest Arkansas, although Stock expects others to bid for NHC's assets in a section 363 auction later this month when Stock’s offer could theoretically be trumped, said Meyer. Stock is currently evaluating NHC’s assets to figure out which to take and which to leave behind, added Meyer.
Meyer said Mellor was nominated to Stock’s board because of his industry connections, his industry understanding and because of his work in construction services at Idaho-based BMHC, which emerged from chapter 11 on 4 January.
Asked if BMHC could be an acquisition candidate, Meyer said that companies with USD 100m to USD 700m in revenues would all be potential candidates, with BMHC fitting into that size category. “They’re large on the West Coast and Texas and that would be a good combination,” said Meyer of BMHC, although other combinations also made sense.
Stock is “very very active” in looking at acquisitions and would consider companies with as little as USD 5m in revenues all the way up to companies with a national scale, said Meyer. “We want to build out our existing footprint in the markets we’re in today. The way to do that is with tuck-ins. We’re also looking at scale players to add heft to the business.” Those scale plays can be in new markets, said Meyer. “It’s less about national scale, it’s more about scale in key markets.”
Small tuck-ins are likely in Stock’s existing markets if they strengthen its market position, added Meyer. In new markets that Stock feels has the right economic growth drivers, acquisitions would be of assets or companies that have a leadership position or brings Stock close to that.
Many acquisitions would be of distressed companies, either already in chapter 11 or about to file for chapter 11, said Meyer.
Stock spent most of last year restructuring as it exited 32 markets. It emerged from bankruptcy in July 2009 as a USD 1bn operation, one-third its previous size, to focus on serving single and multifamily homebuilders and remodelers in 19 markets.
When Gores acquired its stake in Stock from UK building group Wolseley last year, it used Ernst & Young as financial adviser, Skadden Arps Slate Meagher & Flom as legal adviser and the PR firm Sitrick and Company.