What happened

Shares of residential building products suppliers BMC Stock Holdings (BMCH) and Builders FirstSource (BLDR 2.85%) 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.