Please ensure Javascript is enabled for purposes of website accessibility

Why BMC Stock Holdings and Builders FirstSource Jumped This Morning

By Howard Smith – Aug 27, 2020 at 11:29AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The suppliers of building products are merging in an all-stock deal for a combined market value of about $5.5 billion.

What happened

Shares of residential building products suppliers BMC Stock Holdings (BMCH) and Builders FirstSource (BLDR 0.27%) were up as much as 24% and 10%, respectively, early this morning. As of 11 a.m. EDT, BMC remained up 20%, and Builders FirstSource eased back to a 6% gain. The moves follow an announcement today that the two companies have entered into an all-stock merger agreement.

So what

Builders FirstSource is the country's largest supplier of structural building products, while BMC is a more regional supplier in the South and West. The combined companies have over $11 billion in sales. 

wood supplies on new home construction site

Image source: Getty Images.

The all-stock merger will give BMC shareholders 1.3125 shares of Builders FirstSource for each existing share of BMC, resulting in 43% ownership in the combined company. Builders FirstSource shareholders will own 57%.

Now what

Upon completion of the merger, current Builders FirstSource CEO Chad Crow will retire, and current BMC CEO Dave Flitman will become CEO of the merged companies. 

The merger has been unanimously approved by the boards of both companies. The combination, which will have a presence in 42 states, will be the leading supplier of building materials and services to the residential construction industry.  

The companies believe the merger will drive organic growth, as value-added offerings complement each other. BMC's Ready-Frame, a computerized whole-house design solution, combined while Builders FirstSource trusses and manufactured components, will meet the needs of more customers in a more geographically diverse market, the companies said. 

The combined company will operate under the name Builders FirstSource Inc., and be headquartered in Dallas, Texas. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Builders FirstSource Stock Quote
Builders FirstSource
BLDR
$63.62 (0.27%) $0.17
BMC Stock Holdings, Inc. Stock Quote
BMC Stock Holdings, Inc.
BMCH

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
342%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.