A Greenwich-based, publicly-traded supplier of roofing products has proposed to acquire a drywall installation company that is headquartered in Georgia for $5 billion.
QXO Inc., which trades on the New York Stock Exchange as QXO, said it sent a proposal to John C. Turner Jr., president and CEO of GMS Inc., to acquire all outstanding shares of that company for $95.20 per share in cash. GMS trades on the New York Stock Exchange as GMS.
The proposal implies a total transaction value of about $5 billion and reflects a 27% premium over GMS’s 60-day volume-weighted average price of $74.82, QXO said.
“Our all-cash proposal to acquire GMS for $95.20 per share delivers immediate and certain value to GMS shareholders at a meaningful premium,” said Brad Jacobs, chairman and CEO of QXO. “We believe this is a compelling opportunity for GMS investors to realize the full value of their shares in a single, decisive transaction.”
Jacobs said that QXO, which acquired Beacon Roofing Supply earlier this year in a hostile takeover, would take its offer directly to GMS shareholders if GMS did not accept the offer, Reuters reported.
Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC are acting as financial advisors to QXO, and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal counsel.
GMS confirmed receiving QXO’s unsolicited offer and said it will review it before determining what it will do “in the best interests” of the company and its shareholders.
“GMS does not intend to comment further on QXO’s unsolicited proposal until the board has completed its review,” the company said. “GMS shareholders do not need to take any action at this time.”
Jefferies LLC is acting as financial advisor and Alston & Bird LLP is acting as legal adviser to the company.
In a letter to Turner, Jacobs said QXO has noticed during a one-year study of GMS that the company’s performance has been “underwhelming,” pointing out that its EBITDA declined at a 4% annual clip over the last three years, while its peers achieved a median annual increase of 4.6% over the same period.
Jacobs also said GMS missed EBITDA, EBIT and EPS estimates for four of the last five quarters, on average missing EBITDA by 7%, EBIT by 25% and EPS by 9% in this period, and has underperformed the S&P 500 by nearly 1,900 basis points over the last year.
Jacobs also said that sell-side analysts “have lost confidence in GMS,” and the median analyst 12-month price target has fallen to $80 per share from $105 per share only a year ago.
“This underperformance has been frustrating for your shareholders,” he said. As we’ve said before, we don’t play games – we’re straightforward and we move fast.”
