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Beacon Roofing (BECN) to Sell Interior Products Business at $850M logo 12/22/2020

Beacon Roofing Supply, Inc. BECN has signed an agreement to divest the Interior Products business to affiliates of American Securities LLC, a leading U.S. private equity firm, for $850 million. This move will accelerate the company’s efforts to enhance the balance sheet, reduce net leverage and provide it with financial flexibility for pursuing strategic growth initiatives in core exteriors business to drive shareholder value.

Shares of Beacon Roofing gained 4% during the trading session on Dec 21, following the news.

The business includes 81 branch locations, where it distributes construction products including wallboard, acoustical ceilings, steel framing, and insulation to both residential as well as commercial contractors.

With this strategic action, which is expected to conclude in the second quarter of fiscal 2021, Beacon will pursue growth opportunities in core business of residential and commercial roofing and complementary exterior products. Beacon intends to use the anticipated after-tax proceeds of $750 million from this divestiture to reduce net leverage and strengthen the balance sheet.

For fiscal 2020, Interior Products generated $1.03 billion in net sales, incurred a net loss of $11 million and recorded adjusted EBITDA of $73 million. Beacon Roofing will update its fiscal 2021 guidance, reflecting the divestiture of this business.

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Shares of this largest distributor of residential and non-residential roofing materials have gained 40.1% over the past six months, outperforming the industry’s 13.6% rally. Beacon Roofing is benefiting from exceptional operating cost management and cash flow. It has been witnessing improved demand for residential products. Moreover, its digital platform adds to the positives. It increased focus on the new e-commerce platform, OTC (On-Time and Complete) Delivery Network, and a newly-designed website.

Last month, the company came up with better-than-expected results for fourth-quarter fiscal 2020 results. The top and bottom lines surpassed the respective Zacks Consensus Estimate, mainly backed by solid residential backdrop and stronger gross margins.

Zacks Rank

Beacon Roofing — which shares space with Builders FirstSource, Inc. BLDR, Fastenal Company FAST and BMC Stock Holdings, Inc. BMCH in the same industry — currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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