Bain gets second shot at US LBM, setting sights on runway for growth

The building products distributor was acquired last week for approximately $2.5bn through a formal process.

Having long sought to invest behind the US residential market, Bain Capital through US LBM Holdings plans to fuel further growth at one of the country’s largest specialty building product distributors.

Investing out of its $9.4 billion Fund XII, Bain’s mostly equity acquisition of US LBM is expected to close next month. The recently announced deal was valued at approximately $2.5 billion, a source familiar with the matter told PE Hub, confirming a previous Bloomberg report.

Although the industrial distributor faced covid-19 related setbacks, the sale price remained unaffected by covid’s impact on the realty sector.

During the spring timeframe, US LBM closed select locations and experienced slowdowns in projects by contractors, the source said. But the US housing market has rebounded pretty rapidly since then, and ultimately, Bain took a long-term view of the business while determining the valuation, the source explained.

Bain Capital began exploring the acquisition earlier this year, according to Stephen Thomas, managing director at Bain Capital Private Equity, and “when covid hit, things were put on a pause,” he said, speaking from his home office in New Jersey.

The Buffalo Grove, Illinois, supplier provides building materials such as cabinetry, roofing and windows to builders and specialty contractors. It was acquired by New York private equity firm Kelso & Co. in 2015 from BlackEagle Partners – concluding an auction process that involved participation by its new majority owner, Bain Capital.

“We did extensive work in 2015 and believed that US LBM would be a good fit in our value-added investment model,” Thomas said. “But ultimately Kelso prevailed.”

Bain since that time maintained a relationship with CEO LT Gibson, the founder, and followed the company closely.

Boston-headquartered Bain has looked to gain exposure to the US residential housing market for a number of years and US LBM was an attractive asset. “We also liked the strong cash flow,” Thomas said.

Bain is an experienced player in the industrial distribution space, with current investments including Imperial Dade, Dealer Tire and MKM Building Supplies.

US LBM was created as a holding company back in 2009 to acquire three business units of Stock Building Supply – the then second-largest lumber and building materials distributor that filed for Chapter 11 bankruptcy in the same year.

The company has since then made over 50 acquisitions and now operates more than 250 locations across the US, according to its website.

“With our support the company will continue to be a consolidator in what is still today a highly fragmented market,” Thomas said.

US LBM made its first acquisition in 2010 buying eight locations of lumber and building materials dealer Universal Supply Company.

More recently, the platform added two independent companies: Building products dealer Zeeland Lumber & Supply, leading to increased operations in Michigan and Northern Indiana; and Martinez, Georgia’s Maner Builders Supply, expanding its footprint in Georgia and the Carolinas.

To drive organic growth, “we plan to continue making investments in technology, product assortment and service capabilities to enhance the platform,” Thomas added.

The debt component of the transaction will be financed by Barclays and will include a new asset-based revolving credit facility and other new debt financing. Kirkland and Ellis LLP is serving as legal counsel, and PwC as accounting advisor to Bain Capital, according to the press release.

Correction: This report has been updated with the correct size of Bain Capital Fund XII.