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US LBM to Sell Majority Stake to Bain Capital

US LBM Locations Nationwide (Source: Webb Analytics)

US LBM announced today that Bain Capital Private Equity has acquired a majority interest in the dealer, the nation’s fourth-biggest (and soon to be No. 3) full-service pro lumberyard with more than $3.5 billion in revenue and roughly 300 locations in 32 states.

President and CEO L.T. Gibson and the current management team will continue to run the company, US LBM said in a news release. Financial terms of the private transaction were not disclosed.

The transaction is expected to close in December 2020 and is subject to customary closing conditions, including requisite regulatory approvals. Debt financing for the transaction is being led by Barclays and will comprise of a new asset based revolving credit facility and a combination of other new debt financing.

The announcement marks the end of Kelso & Co.’s five-year stint as US LBM’s majority owners. It also comes as Builders FirstSource (the biggest lumberyard on the ProSales 100) and BMC (No. 5) move closer to a merger. US LBM ranks behind only those two and ABC Supply, Beacon Building Products, and 84 Lumber.

US LBM regularly ranks among the most active companies in LBM’s mergers and acquisition scene. In August, it acquired Maner Builders Supply’s three facilities in South Carolina and Georgia, and on Nov. 2 US LBM announced the purchase of Zeeland (MI) Lumber, a $118 million (in 2019 revenues) powerhouse in western Michigan and northern Indiana. It also has opened at least five greenfield locations in 2020.

Last year, US LBM bought three companies with a total of 10 operations in Nevada, Mississippi, and the Cincinnati area, and also opened six new locations, while in 2018 it bought five companies with 12 branches in the Carolinas, Virginia, Maine, and Arizona.

US LBM looks to become the second building product distribution company in BainCapital’s portfolio. In 2017, Bain acquired Britain’s MKM Building Supplies, which has more than 70 branches across the United Kingdom. Its previous investments include HD Supply.

US LBM was created in 2009 out of several firms that had been acquired by Stock Building Supply and then cast off when Stock went through a Chapter 11 bankruptcy reorganization (and ultimately was acquired by BMC). Gibson—an executive at Stock--teamed up with investment firm Building Industry Partners and BlackEagle to create a company dedicated to a business model that emphasized a tiny central office, substantial local authority, and cross-enterprise sharing of best practices. To this day, the official headquarters are virtually empty of senior executives, who live all over the country.

Source: ProSales 100

US LBM’s owners have toyed for years with the idea of going public, starting with an S-1 registration statement in May 2017. From time to time afterward it updated the S-1 with earnings news, but it hasn’t done anything since revealing three quarters of earnings in November 2019.

The transfer of ownership follows a pattern in which a private equity firm will invest in and then hold a company for five years before selling it or doing an initial public offering.

"We have grown tremendously over the past 11 years, and with Kelso's support we were able to accelerate our acquisition strategy that has positioned us for continued growth," Gibson said in the news release. "US LBM's national platform, local go-to-market strategy, relationships with top suppliers, and record of successful integrations continues to make us an acquirer of choice in the building materials industry. We look forward to working with Bain Capital Private Equity and leveraging their experience of helping industrial companies scale and attract additional partners."

"L.T. and his team have built an impressive, enduring business with a winning model that combines the advantages of national scale with a strong local market strategy," said Stephen Thomas, a Managing Director at Bain Capital Private Equity, in the same news release. "We believe US LBM is poised for continued growth and expansion as a leading national building materials distributor. We are excited by the opportunity to work with this talented team and to further grow their integrated platform while maintaining the company's unique culture, people-first mindset and commitment to superior customer service."

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