Brad Jacobs, who put together less-than-truckload carrier XPO and its later spinoffs, 3PL RXO and logistics provider GXO, has snagged his first acquisition in the building products sector through his newest company, QXO.
In what was shaping up to be a hostile takeover attempt, QXO (NYSE: QXO) and Beacon Roofing Supply (NASDAQ: BECN) announced early Thursday that they had reached an agreement to acquire Beacon for $124.35 per share. The total value of the deal is about $11 billion.
When QXO first publicly announced its desire to acquire Beacon on Jan. 15, the price offered was $124.25 per share, just 10 cents less than the final acquisition. The formal tender offer launched Jan. 27.
Beacon’s stock price closed Wednesday at $121.53. Just before QXO announced its desire to acquire Beacon, the stock price of the building products supplier was trading near $102.
Beacon reported net sales of $9.8 billion for calendar year 2024.
The agreement comes about two weeks after Beacon put out a statement calling QXO’s offer “an opportunistic attempt to take advantage of the current macro environment and acquire Beacon at a discount to its intrinsic value for the benefit of QXO but to the detriment of Beacon’s shareholders.” But soon after that statement, it was reported that the two sides were in discussions toward reaching a deal.
Talking since November
While news of QXO’s interest in Beacon first emerged in January, a statement released Thursday by Beacon Chairman Stuart Randle said QXO had first approached Beacon in November.
‘“Since QXO made its initial offer last November, we have evaluated strategic alternatives to enhance value for all of our shareholders,” Randle said. “Following our Board’s comprehensive review, we concluded that this transaction is in the best interests of Beacon and its shareholders given the immediate premium and certainty of value in cash it offers, particularly in an uncertain environment.”
Although a move into consolidating building supply companies may seem a significant change in direction for Jacobs and his prior focus on freight and logistics, he has said he believes the consolidation of the ecosystem of building products suppliers is actually a supply chain story. Jacobs said from the launch of QXO that he saw the industry as fragmented, and that consolidation could provide huge cost savings and synergies, with supply chain benefits as one of the key areas for growth.
In commenting on the transaction, Ryan Merkel of the research firm of William Blair was positive about the deal.
“Beacon employees should feel energized to be part of QXO’s journey to $50 billion of sales,” he said in a report. “Beacon gives QXO a strong nationwide footprint and a business that lends itself well to other adjacencies. Beacon had already started to dig into waterproofing, and we expect QXO to investigate similar adjacent verticals in future moves.”
QXO was created by Jacobs’ acquisition of a small publicly traded software company, SilverSun, that had nothing to do with freight or logistics. Its market cap was about $20 million in late 2023 when the acquisition was complete.
But Jacobs pumped about $1 billion in new capital into the company, transformed it into QXO, his vehicle for buying building products companies and creating a juggernaut in that industry. He moved QXO from the Nasdaq to the New York Stock Exchange. The QXO platform for his move into building products and the logistics behind them was then set up when he took his run at Beacon.
In its announcement that the deal had been completed, QXO said antitrust clearance had been granted in the U.S. and Canada.
Lots of money on hand for more
With other financing completed since the original $1 billion launch of QXO, the company said it has $5 billion of cash and secured financing commitments for the full purchase price, including debt refinancing and transaction costs. It has lined up purchase agreements for an $830 million private placement that will be completed after the Beacon deal is closed.
In a statement released to FreightWaves, a spokesman for QXO said the company intends to make it “very big, as quickly as possible, because it will benefit both our customers and our shareholders. We’re targeting $50 billion of annual revenue.”
Discussing the fragmentation of the industry, the spokesman said QXO has identified 7,000 players in the building products industry in North America and 13,000 in Europe.
Jacobs remains non-executive chairman of RXO (NYSE: RXO), chairman at GXO (NYSE: GXO) and executive chairman at XPO (NYSE: XPO).
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