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Drywall Specialist Foundation Building Materials Sold to P.E. Firm, Goes Private

Foundation Building Material Locations (Source: Webb Analytics)

Foundation Building Materials (FBM) announced late Nov. 15 that an affiliate of the private equity firm American Securities LLC had purchased it in an all-cash transaction. At $19.25 per share, the deal was worth $1.37 billion.

The transaction is expected to close in the first quarter of 2021. Once it does, FBM will stop being a publicly traded company.

FBM ranked ninth on this year's ProSales 100 with 2019 sales of $2.15 billion and more than 170 branches across the United States and Canada. But so far in 2020, this specialist in drywall and steel studs has suffered because the coronavirus pandemic has hurt two key markets: commercial and multifamily construction. The results are shown in the table at right, which represents Webb Analytics' compilation of FBM's sales for the four quarters ended Sept. 30. They show revenues have fallen 5.1% from the previous four quarters to total $2.05 billion. Net profit is just 2.2% but the adjusted EBITDA margin is 8.0%. Note also the company's debt and negative tangible net worth.

Given FBM's challenges in the current economy (its share price hit a 52-week at $21.62 last Dec. 27, FBM shareholders did well in the deal. FBM's stock price closed Nov. 13 at $15.16 per share, so the purchase at $19.25 per share represents a 27% premium.

This appears to be the only holding in a dealer that New York-based American Securities will have in its portfolio. It also owns the Henry Co., a manufacturer of roofing and building envelope products.

FBM's website promotes its stocks of drywall, steel studs, lath, plaster, stucco, acoustical ceilings, insulation, fiberglass reinforced plastic, and exterior insulation finish systems. It ranks behind only GMS among drywall dealers.

Santa Ana, CA-based FBM was founded about a decade ago, was acquired by an affiliate of the private equity firm Lone Star Funds in 2015, and began being publicly traded in 2017.

FBM has been an active dealmaker over the years. In 2018, it did five transactions that brought it 17 locations. Last year, another five deals brought it seven more locations. And this year it did two deals for three more locations. It also opened four greenfield locations in 2019.

"We are pleased to announce this transaction with American Securities, delivering immediate cash value to our shareholders at a significant premium," said Ruben Mendoza, President and CEO of FBM, in the Nov. 15 pressrelease. “American Securities has a proven track record of investing in building products and distribution businesses, and shares our commitment to providing superior products and services to our customers. Having founded FBM nearly a decade ago, I am confident American Securities is the right partner for our company’s next phase, as we work to advance our strategic priorities and continue building long-term value for the Company. This transaction is truly a testament to the hard work and dedication of our more than 3,400 employees, and I’m excited to partner with the team at American Securities to further accelerate our success.”

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