By Sabrina Valle
(Reuters) -Billionaire Brad Jacobs’ new building-products distributor QXO made an offer on Wednesday to acquire GMS for about $5 billion in cash and said it will proceed with a hostile takeover if the company’s management rejects the proposal.
This is Jacobs’s second hostile takeover threat in the building sector this year and part of his plan to turn QXO into a $50 billion revenue building-products distributor within a decade.
The offer comes three months after QXO clinched an $11 billion deal to buy Beacon Roofing Supply, ending a prolonged takeover battle for the roofing company and significantly expanding its footprint in the U.S. and Canada.
An acquisition of GMS would expand QXO’s market from roofs into house interior materials, including drywall.
QXO’s proposal is still technically in the friendly phase, but Jacobs said that if GMS’s board did not accept the offer by June 24, QXO was prepared to bypass management.
“If you choose not to engage … we are prepared to take our offer directly to GMS’s shareholders who we’re confident will find the offer attractive,” Jacobs said in a letter sent to GMS Chief Executive Officer John Turner.
In similar comments made during his takeover offer to Beacon, Jacobs said GMS was poorly managed and could be more profitable to shareholders under his command.
Georgia-based GMS said in a statement on Thursday that it has received an unsolicited proposal from QXO that will be reviewed by its board. It did not immediately respond to a Reuters request for comment.
GMS operates a network of more than 300 distribution centers and its product lineup includes wallboard, ceilings, steel framing and gypsum.
Both Beacon and GMS operate primarily in the U.S., with additional presence in Canada.
The U.S. building industry, mostly locally sourced and fairly protected from tariffs, is undergoing consolidation.
SPECULATION
QXO said it offered $95.20 per share for all outstanding shares of GMS, a premium of about 17% over the company’s closing price on Wednesday.
In the letter, Jacobs disclosed he first approached Turner in June last year, with conversations continuing until at least May 22, when the two CEOs met in New York.
Jacobs added his decision to take the offer public came after GMS’s shares rose following market speculation over a potential QXO acquisition. The offer represents a 29% premium over GMS’s value on May 22, he said.
On Wednesday, before the offer was made public, shares of GMS hit their highest level in almost five months after the company reported upbeat quarterly results and announced an additional $25 million in annualized cost reductions.
Jacobs said following the private talks with Turner, he heard from industry participants that J.P. Morgan and Jefferies bankers had been aggressively trying to find other suitors to buy GMS.
Home improvement chain Home Depot has also made an offer for GMS, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
Spokespersons for Home Depot and GMS declined to comment on the report.
Goldman Sachs and Morgan Stanley are acting as financial advisers to QXO. And Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal counsel.
Jacobs has built an empire of multibillion-dollar companies spanning industries from logistics to waste management and equipment rentals by acquiring companies in industries undergoing consolidation, and spinning some of them off at a higher value.
QXO was a relatively small software company until 2023, when Jacobs invested about $1 billion and renamed and repurposed it.
(Reporting by Sabrina Valle in New York and Surbhi Misra in Bengaluru; Additional reporting by Jaspreet Singh and Niket Nishant in Bengaluru; Editing by Edwina Gibbs, Kate Mayberry and Jamie Freed)
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