TorQuest to sell gypsum dealer WSB Titan for $800 mln


Copyright ©2015 WSB Titan

U.S. wallboard distributor GMS Inc (NYSE: GMS) has agreed to acquire 100 percent of WSB Titan, a Toronto-based gypsum specialty dealer with key products including wallboard, insulation, lumber, roofing, steel framing and other building products. The deal is valued at about $800 million (US$627 million). The seller is Canadian private equity firm TorQuest Partners, which acquired Titan in 2016. Tucker, Georgia-based GMS said the buy will give it a leading position in Canada and the ability to pursue growth opportunities in a fragmented market. With the deal’s close, expected in Q2 2018, Titan CEO Doug Skrepnek will become president of GMS Canada.

PRESS RELEASE

GMS to Acquire WSB Titan, the Largest Wallboard Distributor in Canada

Expands GMS’s leadership position in North America through combination of the largest U.S. and Canadian wallboard distributors

Provides entry and new growth opportunities into highly attractive, fragmented Canadian market
Combines two experienced and well-respected management teams with shared commitment to customer service and operational excellence
The combination increases GMS’s Adjusted earnings per share by approximately 25% and Adjusted EBITDA margin by over 100 basis points on a pro forma basis
Expect to realize at least $10 million in cost synergies within first full year following the close of the transaction
Conference call scheduled for April 5, 2018 at 8:00 a.m., Eastern Time

April 05, 2018

TUCKER, Ga.–(BUSINESS WIRE)–GMS Inc. (NYSE:GMS), a leading North American distributor of wallboard and suspended ceilings systems, announced today a definitive agreement to acquire 100% of the equity interests of WSB Titan (“Titan”) for total consideration of approximately $627 million (C$800 million). Headquartered in Toronto, Titan is Canada’s largest gypsum specialty dealer (“GSD”) serving the residential, commercial, and institutional markets with key products including wallboard, insulation, lumber, roofing, steel framing, and other complementary building products. Titan was founded in 2009 through the partnership of Watson Building Supplies and Shoemaker Drywall Supplies, two trusted wallboard distributors with roots dating back to the 1970s, and expanded the platform in 2015 through the acquisition of Slegg Building Materials, a family-run wallboard and building supplies distributor formed in 1947.

Mike Callahan, President and CEO of GMS, commented, “The acquisition of Titan further extends our leadership position as the largest wallboard distributor in North America with significant scale advantages and a well-balanced portfolio built for growth. The combination also provides us with a market leading position in Canada and the foundation to support future opportunities in this highly fragmented market while creating opportunities to share best practices across our operations. I have been extremely impressed with the quality of Titan’s management team, the excellence of their operations, and their steadfast commitment to service quality, which has resulted in market leading margins and a solid track record of organic and inorganic growth. With a strong cultural fit and shared focus, we are confident this combination will be beneficial to both companies.”

Doug Skrepnek, CEO of Titan, added, “Like GMS, we have built our business through a differentiated service model that fosters loyalty and long-term relationships with top-tier customers and suppliers. This shared commitment, coupled with the opportunity to join forces with another industry leader in North America, makes this combination extremely compelling for Titan’s stakeholders. While we have individual strengths that we plan to leverage across the combined platform, having shared values and similar cultures makes this a natural combination. On behalf of everyone at Titan, we are looking forward to joining the GMS team.”

Strategic Rationale

GMS believes that the acquisition of Titan will result in several strategic and financial benefits, including:

Expansion of Scale and Footprint in North America: Adding the largest Canadian wallboard distributor to GMS’s existing U.S. footprint creates a market-leading North American GSD platform with over 240 locations across 42 U.S. states and five Canadian provinces.
Geographic Expansion into Attractive Market: The acquisition of Titan provides an entry point into the highly attractive, fragmented Canadian GSD market. As an attractive acquirer in Canada with a proven track record of organic and inorganic growth, having completed five transactions and opened four greenfields since 2009, the addition of Titan is expected to allow GMS to participate in further M&A and greenfield opportunities throughout the Canadian GSD market.
Well-Balanced Platform for Growth: The combination will diversify GMS’s product offerings and create significant opportunities for product expansion in both the United States and Canada while enhancing the Company’s ability to serve its customers. In addition, acquiring Titan positions GMS as a key North American distributor of insulation, while further accelerating growth across the combined company’s product portfolio.
Complementary Cultures & Commitment to Customer Service: Titan serves as a value-added partner to a broad base of over 14,500 customers, including some of the largest wallboard interior finishing installers in Canada. Titan’s experienced management team has earned its reputation for operational excellence and service quality, which underpin Titan’s strong culture and are shared by GMS.
Expected to be Immediately Accretive to Adjusted Earnings per Share and Adjusted EBITDA Margin: Titan’s scale, market position, operating platform and value-added services have driven market leading Adjusted EBITDA margins of 14.7% for the twelve months ended January 31, 2018. We estimate that the combination would have increased GMS’s Adjusted earnings per share by approximately 25% and Adjusted EBITDA margin by over 100 basis points on a pro forma basis for the twelve months ended January 31, 2018.
Meaningful Cost Synergies: GMS expects to capture cost synergies of at least $10 million within the first full year following the close of the transaction, driven largely by purchase synergies associated with the combined company’s enhanced scale. These estimates do not include any expected benefits associated with the sharing of best practices or product expansion opportunities.

Management

Mike Callahan will continue to serve as President and CEO of the combined company, which will remain headquartered in Tucker, Georgia. Doug Skrepnek will become President of GMS Canada, reporting to Mr. Callahan.

Transaction Details

Under the terms of the agreement, GMS will acquire 100% of the equity interests of Titan for approximately $627 million (C$800 million) from Titan’s current management and TorQuest Partners. For the twelve months ended January 31, 2018, Titan recorded revenues of approximately $459 million and Adjusted EBITDA of approximately $68 million resulting in a transaction multiple of less than 8.0x Adjusted EBITDA, including the impact of estimated cost synergies.

GMS has secured fully-committed debt financing for the transaction and per the terms of the agreement, existing Titan management, which is committed to leading the combined company’s Canadian business going forward, will roll over $35 million of their current ownership position into GMS stock. GMS remains focused on maintaining a prudent capital structure and a strong financial position with sufficient flexibility to fund ongoing business operations and acquisitions. The transaction is expected to close late in the second calendar quarter of 2018 and is subject to the expiration or termination of the applicable waiting periods under the Canadian Competition Act, as well as other customary closing conditions.

Barclays Capital Inc. is serving as GMS’s exclusive financial advisor, with Jefferies LLC acting as Titan’s exclusive financial advisor. Fried, Frank, Harris, Shriver & Jacobson LLP is serving as lead legal advisor. Barclays Bank PLC, Credit Suisse AG and Credit Suisse Securities (USA) LLC are providing the financing as joint lead bookrunners.

Conference Call and Webcast

GMS will host a conference call and webcast to discuss the acquisition at 8:00 a.m., Eastern Time, on April 5, 2018. Investors who wish to participate in the call should dial 800-289-0438 (domestic) or 323-794-2423 (international) at least 5 minutes prior to the start of the call. The live webcast will be available on the Investors section of the Company’s website at www.gms.com. There will be a slide presentation of the results available on that page of the website as well. Replays of the call will be available through May 5, 2018 and can be accessed at 844-512-2921 (domestic) or 412-317-6671 (international) and entering the pass code 1121351.

About GMS Inc.

Founded in 1971, GMS operates a network of more than 210 distribution centers across the United States. GMS’s extensive product offering of wallboard, suspended ceilings systems, or ceilings, and complementary interior construction products is designed to provide a comprehensive one-stop-shop for our core customer, the interior contractor who installs these products in commercial and residential buildings.

Contacts
GMS Inc.
Investor Relations:
ir@gms.com
678-353-2883
or
Media Relations:
marketing@gms.com
770-723-3378

Photo courtesy of WSB Titan