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PE-backed Builders FirstSource in talks to acquire ProBuild: Reuters

Builders FirstSource Inc (BLDR.O), a U.S. supplier of residential building products, is in discussions to acquire peer ProBuild Holdings Inc for approximately $1.5 billion, including debt, three people familiar with the matter said on Thursday.

A deal would underscore the U.S. homebuilding sector’s consolidation, as companies that are gradually recovering from the impact of the 2008 financial crisis on the property market seek synergies to boost profits.

The negotiations between Builders FirstSource and privately held ProBuild are ongoing and may not lead to an agreement, the people said. Other bidders for ProBuild could also emerge, they added.

The sources asked not to be identified because the discussions are confidential. Builders FirstSource and ProBuild representatives declined to comment.

The deal would be transformational for Builders FirstSource, which currently has a market capitalization of around $600 million and debt of $384 million as of the end of December.

Based in Dallas, Builders FirstSource makes and distributes building products to homebuilding companies. It operates 56 distribution centers and 56 manufacturing facilities, mainly in the southern and eastern United States.

Builders FirstSource reported sales of $1.6 billion and income from continuing operations before income taxes of $19.7 million in 2014, up from sales of $1.5 billion and a loss from continuing operations before income taxes of $41.6 million in 2013.

Fergus Falls, Minnesota-based ProBuild operates about 400 lumber and building product distribution, manufacturing and assembly centers serving 42 U.S. states.

Both companies are backed by private equity firms. Warburg Pincus LLC acquired a 26.2 percent stake in Builders FirstSource from buyout peer JLL Partners in 2006. JLL was left also with a 26.2 percent stake. Almost 10 years later, the two firms still own about half the company.

ProBuild was created in 2006 by Devonshire Investors, the private equity arm of Fidelity Investments, the second-largest U.S. mutual fund firm. Both ProBuild and Builders FirstSource had to be recapitalized by their private equity owners following the housing market meltdown that followed the 2008 crisis.

Builders FirstSource has been particularly acquisitive as it seeks to bolster growth, acquiring six companies and assets in the last 10 months, but spending only between $5 million and $20 million on each deal.

(Reporting by Greg Roumeliotis in New York; Editing by Cynthia Osterman)

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