Beacon to Divest Interior Products Business to American Securities for $850M

Beacon Roofing Supply has executed an agreement to sell its interior products business to affiliates of American Securities LLC, a leading U.S. private equity firm, for $850 million. The transaction is expected to close during the company’s fiscal 2021 second quarter.

The company’s interior products business consists of 81 branch locations where it distributes construction products including wallboard, acoustical ceilings, steel framing and insulation to both residential and commercial contractors. Beacon’s (BECN) interior products business generated net sales of $1.03 billion and a net loss of $11 million in fiscal 2020.

Beacon stated that the $850 million sale price for its interior products business is subject to certain net working capital and other adjustments. It intends to use the after-tax sale proceeds of about $750 million to reduce net leverage and strengthen its balance sheet. (See BECN stock analysis on TipRanks)

CEO Julian Francis stated, “This transaction will substantially accelerate our efforts to improve our balance sheet, reduce net leverage and provide the financial flexibility to pursue strategic growth initiatives in our core exteriors business to drive shareholder value.”

“We are excited about our start to fiscal 2021, especially the growth we are seeing in residential roofing sales. The Interior Products divestiture will allow us to focus entirely on driving growth and profitability in our core exteriors business,” added the CEO.

In reaction to the divestment news, RBC Capital analyst Michael Dahl raised the price target on Beacon to $36 from $33 but reiterated a Sell rating.

The rest of the Street has a cautiously optimistic Moderate Buy analyst consensus based on 4 Buys, 4 Holds and 1 Sell. With shares rising 26.6% so far this year, the average price target of $42.17 indicates a modest upside potential of 4.1% over the coming months.