Stock Building Supply announced Wednesday that it is merging with Building Materials Holding Corp., an Atlanta-based building materials company.
Stock and BMC executives said a merged company would be better able to capitalize on an improving housing market that is generating increased demand for building materials. The combined company would be the second largest distributor of lumber and building materials in the U.S., with $2.7 billion in revenue over the past 12 months.
Executives noted that the two companies also focus on markets with growing populations and year-round construction cycles.
“Not only do the two companies have complementary products and services, they operate in highly attractive long-term growth markets throughout the U.S., positioning the combined company with a strategic amount of room to grow,” Stock CEO Jeff Rea said on a conference call with analysts.
The deal values Stock at $1.5 billion, based on the closing price of the Raleigh company’s shares on Tuesday. BMC shareholders will receive 0.5231 of newly issued Stock shares for each BMC share they own. BMC shareholders will own 60 percent of the combined company, with Stock shareholders owning the rest.
The merger, which is expected to close in the fourth quarter, will result in the Triangle losing another corporate headquarters. The combined company will have its headquarters in Atlanta, but keep its main operating center in Raleigh. The company will continue to operate under both the Stock Building Supply and BMC names in local markets where each has a presence.
Although each company has a strong presence in the South and the West, there is not a great deal of overlap. The merger will expand their footprint from 21 to 42 metropolitan areas in 17 states. Those states account for about 63 percent of the single family permits in the U.S.
Investors reacted positively to the deal. Stock shares rose $2.40, or 13 percent, to close at $20.50 on Wednesday. BMC is privately held.
It’s unclear how many jobs may be eliminated as a result of the merger. The two companies said they expect to achieve $30 million to $40 million in cost savings annually within two years. Those savings are expected to result mainly from operational improvements and technology upgrades.
The new leadership team will include both BMC and Stock executives. BMC’s CEO, Peter Alexander, is to become CEO of the combined company while Rea will join the board of directors.
Stock’s chief financial officer, Jim Major, and its chief operating officer, Bryan Yeazel, will assume those positions with the combined company.
Both BMC and Stock were forced to file for bankruptcy in 2009 when the housing bubble burst and demand for building materials dried up.
Stock lost $246 million in 2008 before it was rescued by The Gores Group, a Los Angeles-based private equity firm that invested $75 million in Stock and became its sole owner. After a trip into bankruptcy that lasted 57 days, Stock emerged much smaller and more narrowly focused, having exited several dozen markets and shed thousands of jobs.
The company raised $98 million in an initial public offering in August 2013. Gores still owns roughly 38 percent of Stock, which was founded in 1922 as Carolina Builders.
BMC emerged from bankruptcy in 2010 as a private company. The company moved its headquarters from Boise, Idaho, to Atlanta last year.