Stock Building Supply Holdings Inc., a supplier of materials to construction companies, agreed to merge with Building Materials Holding Corp. to take advantage of the recovery in the U.S. housing market.
The combined entity will be headquartered in Atlanta and will have an implied enterprise value of $1.5 billion, the companies said in a statement. Building Materials holders will receive 0.5231 of a Stock Building Supply share for each of their shares.
Shares of Stock Building initially surged almost 40 percent, the most since 2013. The stock was trading up 19 percent at $21.45 at 9:53 a.m. in New York.
Building Materials went bankrupt several years ago amid the subprime mortgage crisis and has been closely held since then. Steady hiring, low borrowing costs and a limited supply of existing homes is now helping lift demand in the U.S. for new properties. Housing-related companies from PulteGroup Inc. to Home Depot Inc. have said the spring selling season is off to a good start, and the brighter outlook for sales may spur more residential construction.
“The continuing recovery of the U.S. housing market is expected to generate strong demand for building materials, services and solutions,” said Stock Building Supply Chief Executive Officer Jeff Rea. “Together we believe BMC and Stock Building Supply are better positioned to capitalize on this opportunity.”
Upon closing of the deal, Building Materials CEO Peter Alexander will hold the same position at the combined company. Rea will remain on the board of directors.
Barclays Plc’s investment-banking unit is serving as financial adviser to Stock Building Supply, with Hunton & Williams LLP serving as legal counsel. Goldman Sachs & Co. is financial adviser to Atlanta-based Building Materials and Kirkland & Ellis LLP is legal counsel.