BUILDING PRODUCTS 2016 Annual Review

Transcription

1 BUILDING PRODUCTS 2016 Annual Review EUREKA CAPITAL MARKETS LLC. MEMBER FINRA/SIPC HIGHLIGHTS Construction Activity Overall housing starts declined to an annual rate of 1,090,000 units in November from an annual rate of 1,164,000 units in August. Singlefamily housing starts increased to an annual rate of 828,000 units in November from August s annual rate of 724,000 units. Total construction spending increased from August s level by 1.3% to an annual rate of $1.2 trillion in November. Residential construction spending grew 1.5% over the same period, to an annual rate of $470 billion in November. Corporate and Market Performance Public Company Groups For the Nine Months Ended 9/30/ Stock Price Performance Enterprise Value Revenue Growth EBITDA Growth Q / 2017E EBITDA Manufacturers + 7.6% % 1.1% + 6.9% 8.9x Distributors % % % % 9.9x Lumber Products % % + 5.4% + 5.7% 7.6x Aggregates % % + 8.4% % 10.6x 1 Nine months ended 9/30/2016 vs. nine months ended 9/30/2015 yearoveryear growth. 2 Stock price performance 10/1/2016 through 12/31/ Yearoveryear revenue and EBITDA growth partly reflects Builders FirstSource, Inc. s acquisition of ProBuild Holdings LLC for approximately $1.6 billion in April M&A ACTIVITY The building sector recorded 52 announced M&A transactions in the fourth quarter, bringing the total number of transactions for 2016 to 173, a postrecovery annual high. Q4 highlights include: SRS Distribution announced three acquisitions this quarter: Metro Roofing Supplies, a Conn.based distributor of roofing, siding, windows and gutters with five branches; MidSouth Building Supply of Maryland Inc. a Md.based distributor of residential roofing, windows, kitchen cabinetry and siding, with three branches; and Tri State Aluminum Products of Wisconsin Inc., a singlebranch Wis.based distributor of residential roofing, siding and windows. These deals mark SRS 50th acquisition since 2008 and its entrance into its 41st state. ABC Supply Co. Inc. made two acquisitions this quarter: Trumbull Vinyl Products Inc., an Ohiobased distributor of roofing, siding and other building ; and Ace Aluminum Distributors Inc., a Fla.based distributor of pool and patio. Beacon Roofing Supply, Inc. acquired BJ Building Material Supply Company, a Bristol, Pa.based distributor of Distributor of roofing, siding, lumber, millwork, windows and doors with a single branch. U.S. Building Products M&A Activity 1 Source: Capital IQ, Bloomberg, Company Public Filings, and Press Releases 1. Includes transactions in the construction materials, building, or building distribution sectors with at least one U.S. participant. Excludes construction and engineering services providers; tools and machinery manufacturers and distributors; and natural deposits. Boral Limited announced that is has entered into an agreement to acquire Headwaters Incorporated, a Utahbased manufacturer and distributor of building and construction materials. The transaction is valued at approximately $2.6 billion, a 10.6x multiple of Headwaters trailing 12month adjusted EBITDA. # of Transactions

2 M&A ACTIVITY (continued) The Sterling Group, a Texasbased private equity firm, announced the formation of a new building distribution platform, Construction Supply Holdings, through its simultaneous acquisitions of Brock White Company, LLC, a St. Paul, Minn. headquartered distributor of construction materials, accessories and tools with 29 branches in the Upper Midwest and western Canada, and Border Construction Specialties, LLC, a Phoenixheadquartered distributor of concrete, masonry supplies and sustainable building with 10 branches in the Southwest. The combined company will have 625 employees and offer over 40,000 SKUs for nearly 20,000 customers. American Securities LLC, a N.Y.based private equity firm, announced the acquisition of Henry Company LLC, a Calif.based manufacturer and distributor of roof coatings and cement. Ferguson Enterprises Inc. made two acquisitions in Q4: Ramapo Wholesalers, Inc., a N.Y.based distributor of plumbing and HVAC with seven branches; and The Plumbing Source, Inc., a Hawaiibased distributor of plumbing supplies with a single branch. Virginia Tile Company, LLC, a portfolio company of Harren Equity, acquired RBC Tile & Stone, LLC, a Minn.based distributor of ceramic tile and stone with six branches across Minnesota, Wisconsin, Iowa, Nebraska and Kansas. Backed by Ridgemont Equity Partners, The Cook & Boardman Group acquired Delta Door and Hardware, LLC, a Tenn. based distributor of commercial doors, frames and hardware. The acquisition expands Cook & Boardman s geographic footprint into the Tennessee, Arkansas and Mississippi markets. HOUSING STARTS AND CONSTRUCTION SPENDING U.S. Housing Starts (Seasonally Adjusted Annual Rate) U.S. Construction Spending (Seasonally Adjusted Annual Rate) 2, , Thousands of Units 1,500 1, Billions of Dollars Nov06 May07 Nov07 May08 Nov08 May09 Nov09 May10 Nov10 May11 Nov11 Total Housing Starts May12 Nov12 May13 Nov13 May14 Single Family Nov14 May15 Nov15 May16 Nov16 0 Nov06 May07 Nov07 May08 Nov08 May09 Nov09 May10 Nov10 May11 Residential Nov11 May12 Nov12 May13 Nov13 May14 NonResidential Nov14 May15 Nov15 May16 Nov16 MARKET PERFORMANCE 1 Distributors and Manufacturers Indices vs. S&P % Lumber and Wood Products, Aggregates and Cement, and Heavy Construction Materials Indices vs. S&P % 30.0% 28.4% 60.0% 50.0% 58.1% Index Relative Change 20.0% 10.0% 0.0% 10.0% 20.0% 19.9% 9.5% 4.3% 40.0% 30.0% 20.0% 10.0% 0.0% 10.0% 20.0% 32.4% 9.5% 5.7% 30.0% 30.0% 12/31/15 1/31/16 2/29/16 3/31/16 4/30/16 5/31/16 6/30/16 7/31/16 8/31/16 9/30/16 10/31/16 11/30/16 12/31/16 12/31/15 1/31/16 2/29/16 3/31/16 4/30/16 5/31/16 6/30/16 7/31/16 8/31/16 9/30/16 10/31/16 Index Relative Change 11/30/16 12/31/16 S&P 500 Index Distributors S&P 500 Index Lumber and Wood Products Manufacturers Mid/Large Cap Manufacturers Small Cap Aggregates and Cement Heavy Construction Materials 1. Indices are based on public companies, as listed on the newsletter s Public Company Valuation Multiples table. BMC Stock Holdings, Inc. and TopBuild Corp. are excluded from the Distributors Index.

3 PUBLIC COMPANY VALUATION MULTIPLES (dollars in millions) Company Multiples of Enterprise Value to Revenue EBITDA Margin Revenue EBITDA Revenue EBITDA Distributors Beacon Roofing Supply, Inc. 93% $2,760 $3,861 $4,127 $ % 0.9x 10.8x 0.9x 9.7x Bluelinx Holdings Inc. 77% , % 0.2x 14.7x NA NA BMC Stock Holdings, Inc. 91% 1,299 1,692 2, % 0.6x 10.0x 0.5x 7.4x Builders FirstSource, Inc. 78% 1,208 3,146 6, % 0.5x 9.2x 0.5x 7.0x Huttig Building Products Inc. 94% % 0.3x 9.1x NA NA Installed Building Products, Inc. 93% 1,300 1, % 1.8x 15.3x 1.4x 10.7x Pool Corp. 97% 4,313 4,682 2, % 1.8x 17.2x 1.7x 15.6x TopBuild Corp. 90% 1,354 1,434 1, % 0.8x 10.1x 0.8x 8.6x Wolseley plc 100% 15,274 16,466 19,161 1, % 0.9x 11.9x 0.8x 10.4x Average 0.9x 12.0x 0.9x 9.9x Median 0.8x 10.8x 0.8x 9.7x Manufacturers Mid/Large Cap Armstrong World Industries, Inc. 86% $2,307 $3,042 $2,423 $ % 1.3x 10.4x 2.4x 8.9x Fortune Brands Home & Security, Inc. 83% 8,249 9,558 4, % 1.9x 12.7x 1.8x 10.7x Masco Corporation 85% 10,381 12,343 7,313 1, % 1.7x 10.3x 1.6x 9.2x Mohawk Industries Inc. 92% 14,809 17,443 8,775 1, % 2.0x 10.3x 1.9x 9.6x Owens Corning 88% 5,843 7,939 5,591 1, % 1.4x 7.6x 1.4x 7.4x USG Corporation 90% 4,219 5,460 3, % 1.4x 9.0x 1.7x 8.3x Average 1.6x 10.1x 1.8x 9.0x Median 1.6x 10.3x 1.7x 9.1x Manufacturers Small Cap American Woodmark Corp. 84% $1,223 $1,033 $982 $ % 1.1x 8.9x 1.0x 7.8x Apogee Enterprises, Inc. 99% 1,548 1,471 1, % 1.4x 9.6x 1.2x 8.1x Continental Building Products, Inc. 93% 924 1, % 2.5x 11.4x 2.4x 8.4x Masonite International Corporation 90% 1,973 2,410 1, % 1.2x 10.7x 1.2x 8.4x NCI Building Systems Inc. 86% 1,115 1,448 1, % 0.9x 9.3x 0.8x 7.6x Ply Gem Holdings, Inc 96% 1,108 1,977 1, % 1.1x 8.7x 1.0x 7.6x Quanex Building Products Corporation 93% % 1.0x 9.1x 1.0x 8.5x Trex Co. Inc. 89% 1,990 1, % 4.2x 17.5x 3.8x 13.8x Lumber and Wood Products Stk. Price as a % of LTM High Market Cap. Market Data Enterprise Value LTM Financials Average 1.7x 10.7x 1.5x 8.8x Median 1.1x 9.4x 1.1x 8.2x Boise Cascade Company 75% $863 $1,314 $3,868 $ % 0.3x 8.2x 0.3x 6.9x Canfor Corp. 75% 1,510 1,994 3, % 0.6x 5.4x 0.6x 4.8x LouisianaPacific Corp. 89% 2,692 2,965 2, % 1.4x 11.3x 1.2x 6.2x Norbord, Inc. 94% 2,167 2,824 1, % 1.7x 9.0x 1.4x 5.5x Universal Forest Products Inc. 92% 2,077 2,166 3, % 0.7x 10.7x 0.6x 8.7x West Fraser Timber Co. Ltd. 89% 2,808 3,103 3, % 0.9x 7.4x 0.8x 5.6x Weyerhaeuser Co. 90% 22,509 30,562 7,871 1, % 3.9x 17.3x 4.3x 15.8x Average 1.4x 9.9x 1.3x 7.6x Median 0.9x 9.0x 0.8x 6.2x Aggregates and Cement CEMEX, S.A.B. de C.V. 91% $11,272 $26,311 $12,884 $2, % 2.0x 10.2x 1.7x 8.4x CRH plc 96% 28,968 37,151 29,938 3, % 1.2x 12.2x 1.2x 10.1x Eagle Materials Inc. 96% 4,751 5,166 1, % 4.5x 15.0x 3.9x 11.5x HeidelbergCement AG 94% 18,600 29,749 16,104 2, % 1.8x 10.5x 1.5x 7.9x LafargeHolcim Ltd. 91% 32,055 52,247 28,647 2, % 1.8x NM 2.0x 9.0x Martin Marietta Materials, Inc. 94% 14,060 15,767 3, % 4.5x 17.2x 3.9x 13.1x Vulcan Materials Company 91% 16,559 18,407 3, % 5.1x 18.8x 4.5x 14.5x Average 3.0x 14.0x 2.7x 10.6x Median 2.0x 13.6x 2.0x 10.1x Heavy Construction Materials Boral Limited 73% $4,586 $5,218 $3,212 $ % 1.6x 13.8x 1.7x 10.7x Headwaters Incorporated 1 98% 1,761 2, % 2.5x 14.2x 2.0x 9.8x James Hardie Industries plc 95% 7,004 7,530 1, % 4.1x 16.6x 3.7x 14.4x U.S. Concrete, Inc. 94% 1,001 1,388 1, % 1.2x 10.5x 1.0x 7.1x LTM 2017E Average 2.4x 13.8x 2.1x 10.5x Median 2.1x 14.0x 1.9x 10.2x 1 Headwaters Incorporated share price reflects the proposed, announced acquisition by Boral Limited on 11/20/2016

4 SELECTED M&A TRANSACTIONS Date Announced Target / Parent Acquirer Target Business Description 12/30/2016 Stetson Building Products, LLC Construction Supply Holdings Distributor of commercial building (The Sterling Group) including; reinforcing steel, concrete forming, commercial roofing and erosion & storm w ater systems 12/23/2016 Floors, Inc. and Malibu Dunes Point Capital Distributor and installer of flooring Acceptance Corp. 12/21/2016 ES Window s, LLC Tecnoglass, Inc. Distributor of architectural glass, w indow s and 13 aluminum 12/19/2016 SoftLite, LLC Harvey Industries, Inc. Manufacturer of w indow s and siding patio doors 12/16/2016 BJ Building Material Supply Beacon Roofing Supply, Inc. Distributor of roofing, siding, lumber, millw ork, Company w indow s and doors 12/16/2016 Snappy Air Distribution Products, M&M Manufacturing Company, Inc. Manufacturer of metal duct systems for the Inc. residential HVAC market 12/15/2016 Tectum, Inc. Armstrong World Industries, Inc. Manufacturer of acoustical ceiling, w all and structural solutions for commercial building applications 12/14/2016 Rmax Operating, LLC Sika Manufacturer of polyiso insulation for complete building envelope solutions (Roofing and Wall systems) 12/08/2016 Rosboro Company, LLC Wynnchurch Capital Manufacturer of solid and engineered w ood 12/07/2016 J.E. Berkow itz, LP Consolidated Glass Holdings Distributor and fabricator of architectural glass (Grey Mountain Partners) for both exterior and interior projects 12/06/2016 Delta Door and Hardw are, LLC The Cook & Boardman Group Distributor of commercial doors, frames and (Ridgemont Equity Partners) hardw are 12/05/2016 NACS USA Inc. Blue Wolf Capital Partners Manufacturer and distributor of mouldings, stair parts, doors and other specialty building 12/05/2016 Metro Roofing Supplies Inc. SRS Distribution, Inc. Distributor of roofing, siding, w indow s, gutters and other building 12/02/2016 Xella Group Lone Star Funds Manufacturer of aerated concrete blocks, 2,300 calciumsilicate units and gypsum fiberboards 12/02/2016 Certain Assets of Eastern Hajoca Corporation Distributor of electrical, plumbing and heating Pennsylvania Supply Co. goods 11/28/2016 Top Master, Inc. Clio Holdings, LLC Manufacturer and installer of counter tops for homes and commercial projects 11/21/2016 Guardian Industries Corp. Koch Industries, Inc. Manufacturer and fabricator of float glass and (55.5 percent stake not already ow ned) glass for commercial and residential applications 11/20/2016 Headw aters Incorporated Boral Industries, Inc. Manufacturer and distributor of building 2,629 and construction materials 11/18/2016 Highland Sand & Gravel, Inc. Progressive Green Solutions, Inc. Manufacturer and distributor of crushed stone, sand and gravel for commercial and residential needs 11/16/2016 O&S Doors Sun Capital Partners Manufacturer of custom doors for bedrooms and kitchens 11/10/2016 Trumbull Vinyl Products Inc. ABC Supply Co. Inc. Distributor of roofing, siding and other building 11/09/2016 Halex Corporation GCP Applied Technologies Inc. Manufacturer of flooring installation 47 11/08/2016 Mesker Openings Group dormakaba Holding AG Manufacturer of commercial doors and related 11/07/2016 Tri State Aluminum Products of SRS Distribution, Inc. Distributor of residential roofing, siding, Wisonsin, Inc. w indow s and other building 11/04/2016 Brock White Company LLC and The Sterling Group Distributors of construction materials, Border Construction Specialties accessories and tools primarily for professional LLC concrete and masonry contractors 11/04/2016 Northeast Wholesale Nail & PrimeSource Building Products Inc. Distributor of fasteners and building materials Fastener Supply Co., Inc. 11/03/2016 Patriot Flooring Supply, Inc. Ponypic, LLC Distributor of laminated hardw ood and laminated flooring Source: S&P Capital IQ, Company Public Filings, and Press Releases Deal Size ($ in mm) 143

5 SELECTED M&A TRANSACTIONS Date Announced Target / Parent Acquirer Target Business Description 11/02/2016 B.R. Johnson, Inc. Regional Brands, Inc. Distributor and fabricator of w indow s, doors 15 (Lorraine Capital LLC) and other specialty 11/02/2016 Stone Panels, Inc. Cold Spring Granite Company Manufacturer of natural stone composite panels 6 for exterior and interior applications 11/01/2016 Ryan Building Materials, Inc. GMS Inc. Distributor of dryw all, steel framing, insulation and finishing 10/31/2016 Jock and Meldrum Inc. Progressive Plumbing Supply Distributor of plumbing and HVAC 10/25/2016 American De Rosa Lamparts, Resilience Capital Partners Distributor of lighting to the residential LLC (d/b/a Luminance) and commercial markets 10/25/2016 Ace Aluminum Distributors Inc. ABC Supply Co. Inc. Distributor of pool and patio 10/24/2016 The Plumbing Source, Inc. Ferguson Enterprises, Inc. Distributor of plumbing supplies 10/24/2016 MidSouth Building Supply of SRS Distribution, Inc. Distributor of residential roofing, w indow s, Maryland Inc. kitchen cabinetry, siding and accessories 10/21/2016 Southland Flooring Supplies, Inc Centre Lane Partners, LLC Distributor of flooring and related 10/18/2016 USFloors Inc Shaw Industries Group, Inc. Manufacturer and distributor of sustainable natural flooring to commercial and residential markets 10/17/2016 Continental Products Company Keene Building Products Manufacturer of Puttylastic, Weather Seal and Kool Ray branded for the greenhouse and log cabin industry 10/17/2016 Haw keye Building Distributors Guardian Building Products Distributor of roofing and millw ork 10/13/2016 Giant Cement Holding, Inc. Elementia, S.A. Manufacturer and distributor of cement and 220 aggregates 10/11/2016 Granite Source, Inc. Clio Holdings, LLC Manufacturer, fabricator and installer of stone counter tops 10/11/2016 Princess Marbel Company Clio Holdings, LLC Fabricator and installer of natural and manufactured stone 10/10/2016 Ramapo Wholesalers, Inc. Ferguson Enterprises, Inc. Distributor of plumbing and HVAC 10/07/2016 RBC Tile & Stone, LLC Virginia Tile Company, LLC (Harren Equity Partners) Distributor of ceramic tile and stone for the commercial and residential markets 10/07/2016 Fullerton Lumber Co, Inc. Consolidated Lumber Company, LLC Distributor of lumber, deck, fence, kitchen (Aiglon Capital) cabinets and building materials 10/06/2016 Elite Multifamily Interiors, LLC Republic Industries, Inc. Manufacturer, distributor and fabricator of granite, quartz and marble surfaces for builders and property ow ners 10/06/2016 Dealers Building Supply, Inc. The Firefly Group and Kocolene Distributor of doors, door hardw are and Development Corporation fireplaces to the commercial and residential markets 10/06/2016 Henry Company LLC American Securities LLC Manufacturer and distributor of roof coatings and cement 10/05/2016 EdgeBuilder Wall Panels, Inc. and Glenbrook Lumber & Supply, Inc. ATRM Holdings, Inc. Manufacturers of w all panel systems and related building for commercial and residential markets 10/04/2016 United Building Materials, Inc. GMS Inc. Distributor of dryw all, metal framing, acoustical ceilings and insulation 10/01/2016 Low 's Ready Mix Clements Concrete Manufacturer of ready mix concrete 10/01/2016 The Delaney Co. HCI Equity Partners Manufacturer and distributor of locksets, bath accessories, hinges, door closers and builders hardw are Deal Size ($ in mm) 5 Source: S&P Capital IQ, Company Public Filings, and Press Releases

6 CONTACT INFORMATION Bruce Altman Managing Director (646) EUREKA CAPITAL MARKETS, LLC Eureka is a partnerowned investment bank specializing in mergers & acquisitions, financings, restructurings, fairness opinions and valuations. We represent a range of clients including entrepreneur and familyowned businesses, public companies, private equity groups, Global 1000 companies and fiduciaries. Our areas of industry focus include Industrials, Healthcare, Consumer Products and Business Services. Eureka s professional team has more than 100 years of combined investment banking, consulting and related experience. We have completed over 400 advisory engagements in a wide variety of service areas and industry sectors. Further, we have honed our valuation skills on more than 350 transactional assignments and over 1,000 independent nontransactional valuations. NEW YORK 52 Vanderbilt Ave, Suite 902 New York, NY Ph: Fx: CALIFORNIA 555 Anton Blvd, Suite 910 Costa Mesa, CA Ph: Fx: This report is for information purposes only and is not intended as an offer or solicitation with respect to any purchase or sale of any security. Eureka Capital Markets, LLC gathers its data from sources it considers reliable; however, it does not guarantee the accuracy or completeness of the information provided within this publication. The opinions presented herein reflect the current judgment of the authors and are subject to change. Eureka Capital Markets, LLC makes no warranties, expressed or implied, regarding the accuracy of this information or the subjective opinions expressed by the authors. Eureka Capital Markets, LLC, its officers, directors and partners may at any time have positions in the securities of the companies discussed herein Eureka Capital Markets, LLC. All rights reserved. January 2017