– Creates Diversified Two-Step Distributor with
$3.2 Billion in Revenue – – Enhances Position as a Leading Building
Products Wholesale Distributor with Expanded Offerings,
Capabilities and Geographic Reach to Accelerate Growth –– Expects
to Generate At Least $50 Million of Annual Cost Savings Within 18
Months –– Significantly and Immediately Accretive to Earnings ––
Conference Call Scheduled for March 12, 2018 at 8:00am EST –
BlueLinx (NYSE:BXC), a leading distributor of building and
industrial products in the United States, today announced that it
has entered into a definitive agreement to acquire Cedar Creek, a
leading building products wholesale distributor, a portfolio
company of Charlesbank Capital Partners for a purchase price of
$413 million on a debt-free, cash-free basis. The purchase price
will consist of approximately $345 million in cash and
approximately $68 million as the agreed value of the capital
leases. The transaction has been unanimously approved by BlueLinx’s
Board of Directors and is expected to be completed within 45 days,
subject to customary closing conditions and regulatory approvals.
The combination of BlueLinx and Cedar Creek will
create a leading building products wholesale distributor with one
of the largest product offerings in the building products industry,
including over 50,000 branded and private-label SKUs, and a
distribution footprint of 70 national locations servicing 40
states. Together with Cedar Creek, BlueLinx will be able to
distribute its comprehensive range of structural and specialty
products to approximately 15,000 national, regional, and local
dealers, as well as specialty distributors, national home centers,
industrial, and manufactured housing customers. The transaction
will enable the combined entity to serve diverse end markets from
new residential and light commercial construction to industrial, as
well as residential repair and remodel. BlueLinx and Cedar Creek’s
combined revenue was $3.2 billion in 2017 and its pro forma LTM
Adjusted EBITDA for 2017 would have been approximately $154 million
including at least $50 million of annual cost savings.
“We are pleased to announce the combination of
Cedar Creek and BlueLinx,” said Mitch Lewis, President and Chief
Executive Officer of BlueLinx. “Cedar Creek’s commitment to organic
growth and its customers as well as its track record of successful
acquisitions make it an ideal partner for BlueLinx. The combination
will significantly enhance our product portfolio by providing
greater breadth and depth of building products and services for our
customers and suppliers across our markets. This transaction will
create a leading U.S. wholesale distributor of building and
industrial products, and significantly enhance the value that we
can deliver to our customers, as well as our supplier partners, and
end-market consumers. With an extensive cache of products, the
benefits of our combined technology and a strong footprint East of
the Rockies, we will be well-positioned to drive profitable growth
for our stakeholders, as we realize the significant strategic and
financial benefits of this transaction and expand to additional
geographic territories. I look forward to working alongside Alex
Averitt, CEO of Cedar Creek, and D. Wayne Trousdale, Chairman at
Cedar Creek, who will both become an integral part of our combined
Company. I am particularly pleased to welcome Cedar Creek’s highly
talented associates as we bring together our two great companies
and complementary cultures to create an industry leader.”
“We are pleased to join forces with BlueLinx to
provide a wider range of products and services to our valued
customers,” said Alex Averitt, Cedar Creek Chief Executive Officer.
“We have admired BlueLinx’s resilience and recent performance, as
well as its geographic scope and product portfolio, and D. Wayne
and I look forward to working closely with Mitch and the BlueLinx
management team as we integrate our companies, continue to grow our
businesses and create enhanced opportunities for both Cedar Creek
and BlueLinx associates. We look forward to our future and are
committed to ensuring a seamless transition."
Josh Beer, Managing Director of Charlesbank
Capital Partners, said, “This transaction represents a major
milestone in Cedar Creek’s storied history of growth and is a
terrific outcome for Cedar Creek and BlueLinx. The combination with
BlueLinx will create a leading building products distributor that
is even stronger – financially, operationally and strategically. We
are proud of what Cedar Creek has accomplished over the years in
building a culture of excellence while delivering best-in-class
service and products to customers. This transaction ensures that
Cedar Creek will continue to thrive for the years to come.”
Compelling Strategic and Financial
Benefits for the Creation of Significant Shareholder
Value
BlueLinx believes that the combination of Cedar
Creek and BlueLinx will provide many significant strategic and
financial benefits:
- Comprehensive Product and Services Portfolio Provides
Opportunity for Accelerated Growth: The combined company
will have one of the largest product offerings in the building
products industry, including cedar and other premium lumbers,
industrial and commodity lumber, engineered wood products, siding
and trim, moulding, roofing, vinyl products, insulation, structural
panels, and metal products. Complementing BlueLinx's current
fabrication capabilities, the addition of Cedar Creek's milling,
manufacturing, and paint line capabilities will enable the combined
entity to provide remanufactured lumber, custom timbers, coated
siding, industrial products and moulding faster, and at a better
value, than competitors who outsource production. The combination
of these comprehensive products and services position the combined
company well for accelerated growth.
- Enhances Geographic Presence, Creating a Market
Leader: The combined company will have 70 facilities
servicing 40 states, creating a seamless distribution footprint
with improved inventory availability to service customers’ needs
across all regions. Further, the combined company will have the
opportunity to expand product lines to additional geographic
territories over time.
- Diversified and Established Customer Base:
BlueLinx and Cedar Creek have deep, longstanding relationships with
an extensive roster of high-quality national and regional
customers, many of which average more than 20 years. The combined
company will have a diverse and established customer base, reaching
approximately 40,000 locations, and its expanded reach will enhance
the value it can provide to national retail and the Pro Dealers in
Specialty Distribution. No single customer will represent more than
5 percent of sales. Furthermore, through its comprehensive product
portfolio with strong brand recognition across key categories, the
combined company expects to strengthen and deepen these customer
relationships.
- Well Positioned to Grow with Housing Recovery:
The combination creates a leading distributor that is positioned to
grow as the U.S. housing market continues to recover. We remain
approximately 20% below historical annual single-family housing
starts in the United States, so the opportunity remains strong for
favorable building product and distribution demand. As the U.S.
housing market recovers, BlueLinx and Cedar Creek will also benefit
from strong consumer spending in repair and remodeling.
- Significant Cost Savings Opportunities: The
combination of BlueLinx and Cedar Creek will be able to drive
significant cost savings through network and fleet optimization,
procurement opportunities, and G&A expense savings. The
integration process is expected to generate annual run-rate cost
savings of at least $50 million annually, which BlueLinx believes
will be realized on an annual run-rate basis within 18 months
following the close of the transaction. The company believes that
cost savings opportunities exist which, if successfully
implemented, would cause total savings to be substantially higher
than this amount.
- Enhanced Financial Flexibility and Commitment to
Deleveraging: The transaction is expected to be
immediately accretive to BlueLinx’s earnings per share and provide
financial strength to support BlueLinx’s continued commitment to
deleveraging.
Headquarters and Management
Both companies have highly experienced executive
teams with proven leaders in the building products industry. Mitch
Lewis, President and Chief Executive Officer of BlueLinx, will
continue as CEO of the combined company, which will remain
headquartered in Atlanta, Georgia. Alex Averitt, CEO of Cedar
Creek, will become COO of BlueLinx and D. Wayne Trousdale, Chairman
of Cedar Creek, will become Vice Chairman of the operating
companies. Initially, the Parent Company will remain named BlueLinx
and Cedar Creek will retain its name in its locations.
Transaction Financing and
Approvals
BlueLinx has commitments from Wells Fargo Bank,
N.A. and Bank of America, N.A. to arrange a $750 million revolving
credit facility (the “ABL Revolver”) that includes a $150 million
accordion feature, subject to certain conditions, including the
finalization of definitive loan agreements. Additionally, BlueLinx
has a commitment from HPS Partners for a $180 million term loan,
subject to certain conditions, including the finalization of
definitive loan agreements. Proceeds from the ABL Revolver and Term
Loan will be used, among other things, to fund the purchase price
and repay debt. The Company anticipates having excess
availability under the ABL Revolver after the acquisition closes
and at the end of the second fiscal quarter of approximately $110
million.
Moelis & Company is acting as financial
advisor for BlueLinx, and King & Spalding and Fried Frank are
serving as primary legal counsel for the Company.
The transaction is expected to be completed
within 45 days, subject to customary closing conditions and
regulatory approvals.
Conference Call, Webcast and
Presentation
BlueLinx management team will host a conference
call to discuss the transaction today, March 12, 2018, at 8:00 am
EST. Participants can access the live conference call via
telephone at (877) 873-5864, using Conference ID # 7287178.
Investors will also be able to access an archived recording of the
conference call for one week following the live call by dialing
404-537-3406, Conference ID# 7287178.
The live audio of the conference call and
accompanying materials will also be available and can be accessed
by visiting BlueLinx’s Webcasts and Presentations section of their
website. You can access this information by going to
www.BlueLinxCo.com and selecting "Investor Relations" from the
options at the bottom of the page and then "Webcasts/Presentations"
from the drop-down menu.
About BlueLinx
BlueLinx Holdings Inc., operating through its
wholly owned subsidiary BlueLinx Corporation, is a leading
distributor of building and industrial products in the United
States. The Company is headquartered in Atlanta, Georgia and
operates its distribution business through its broad network of
distribution centers. BlueLinx is traded on the New York Stock
Exchange under the symbol BXC. Additional information about
BlueLinx can be found on its website at www.BlueLinxCo.com.
About Cedar Creek
Cedar Creek, established in 1977 as wholesale
building materials company, provides wood products for the heart of
America. The Company is headquartered in Oklahoma with operations
in the United States, offering a wide range of products that vary
by region.
Contacts:Investors:Susan
O’Farrell, SVP, CFO &
Treasurer
BlueLinx Holdings
Inc.
(770) 953-7000
Natalie Poulos, Investor RelationsBlueLinx
Holdings
Inc.
(866)
671-5138
investor@bluelinxco.com
Media:Trevor Gibbons / Amy FengJoele Frank, Wilkinson Brimmer
Katcher(212) 355-4449
Use of Non-GAAP Measures and
Supplementary Information
BlueLinx reports its financial results in
accordance with accounting principles generally accepted in the
United States (“GAAP”). The Company also believes that presentation
of certain non-GAAP measures may be useful to investors. Any
non-GAAP measures used herein are reconciled to the financial
tables set forth in the appendices hereto. The Company cautions
that non-GAAP measures should be considered in addition to, but not
as a substitute for, the Company’s reported GAAP results.
We define Adjusted EBITDA as an amount equal to
net income plus interest expense and all interest expense related
items, income taxes, depreciation and amortization, and further
adjusted to exclude certain non-cash items and other adjustments to
Consolidated Net Income.
FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements regarding the proposed
combination. All of these forward-looking statements are based on
estimates and assumptions made by BlueLinx’s management that,
although believed by BlueLinx to be reasonable, are inherently
uncertain. Forward-looking statements involve risks and
uncertainties, including, but not limited to, economic,
competitive, governmental, and technological factors outside of
BlueLinx’s control that may cause its business, strategy or actual
results to differ materially from the forward-looking
statements.
Forward looking statements in this press release
regarding the amount, composition and timing of potential synergies
and cost savings that may or are expected to result from the
combination involve risks and uncertainties in addition to those
enumerated below, including, but not limited to, that the
substantial challenges inherent in the combination of the two
companies prevents identified cost synergies from being realized
without adversely affecting current revenues and investments in
future growth, that the integration process results in the
distraction of the combined company’s management, the disruption of
BlueLinx's ongoing business or inconsistencies in its services,
standards, controls, procedures and policies, any of which could
adversely affect its relationships with customers, vendors and
employees or its ability to achieve the anticipated benefits of the
combination, that the integration of the two companies may take
more time and be more costly than anticipated, and that identified
cost saving opportunities might not be fully or timely
realized.
Risks and uncertainties that relate to the
proposed combination may include, among other things: the
occurrence of any event, change or other circumstances that could
give rise to the termination of the definitive agreement; the
failure to realize the benefits expected from the combination; the
acquisition-related combination costs and BlueLinx’s restructuring
and integration related costs and charges; BlueLinx’s projections
as to the timing of completion of the combination; risks related to
disruption of management time from ongoing business operations due
to the combination; the risk that the necessary regulatory
approvals may not be obtained or may be obtained subject to
conditions that are not anticipated or that may be burdensome;
risks that any of the conditions to the completion of the
combination may not be satisfied in a timely manner; the impact of
the combination on BlueLinx’s business; the expected terms, types
and amount of the expected financing for the combination; the
failure to close the expected financing for the combination; and
other factors described in the “Risk Factors” section in BlueLinx’s
Annual Report on Form 10-K for the year ended December 30, 2017,
and in other documents filed with the Securities and Exchange
Commission by BlueLinx from time to time. Given these risks and
uncertainties, you are cautioned not to place undue reliance on
forward-looking statements. BlueLinx undertakes no obligation to
publicly update or revise any forward-looking statement as a result
of new information, future events, and changes in expectations or
otherwise, except as required by law.
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