Beacon, QXO in 'friendly' talks on $11B deal as QXO aims to double EBITDA

Investing.com -- Shares of Beacon (NASDAQ:BECN) surged 8% in pre-open trading Monday following the announcement of now 'friendly' discussions with QXO Inc (NYSE:QXO) about a potential acquisition. The two sides had been entrenched in separate corners until the news today. QXO has proposed purchasing the building material company for $124.35 per share in cash, valuing the company at approximately $11 billion. This offer marginally exceeds the previous bid made in November by $0.10 per share.

QXO is currently performing customary due diligence to examine Beacon's business operations closely. Concurrently, the two companies are working towards finalizing a definitive agreement. Due to these developments, Beacon has decided to delay its Investor Day, which was initially planned for March 13, 2025.

A spokesperson from QXO told Investing.com that it is confident in its ability to double Beacon's EBITDA within the next five years. QXO's strategy includes leveraging additional mergers and acquisitions to achieve projected revenues exceeding $50 billion.

"If we come to an agreement with Beacon, we expect it to be the first of many acquisitions for QXO. It will put us on a pathway to our stated goal of $50 billion in revenue," QXO's spokesman said. "Beacon would be the ideal first acquisition for QXO as we enter the building products industry. It's the second largest distributor of roofing products, a large, $70 billion to $80 billion industry."

"We’re highly confident that the playbook we’ve used in the waste management, rental equipment and transportation business is completely applicable to Beacon. At XPO, for example, after acquiring two very large companies in 2015 - Norbert Dentressangle and Con-way - we integrated both simultaneously into a cohesive, global organization and doubled each of their profits between 2015 and 2018. We think there are similar opportunities here," the spokesman added. "Beacon is levered to the big secular growth themes of why we got into this industry. The average commercial building is over 50 years old, the average home is over 40 years old and there is a shortage of 4 million homes that need to be built. Plus, 80% of Beacon's business is Repair&Remodeling, which is highly stable, non-discretionary and less cyclical. Replacing a leaking or damaged roof is a necessity, not a decision. This is primarily a 'made in the USA,' 'sold in the USA' business. The tariff risk is minimal."

Today's announcement marked a pivotal moment for QXO and is seen as a potential game-changer for its stock, according to sources familiar with the matter. Institutional investors that have been on the sidelines may soon have the opportunity to engage with QXO's shares following the anticipation of an operating asset acquisition. The company, which lacked an underlying distribution business when it launched last summer, could see a shift in investor interest if a definitive agreement with a business like Beacon is signed.

The prospect of such a deal will likely spark interest among many of QXO's Brad Jacobs' former supporters, who have previously profited from his ventures but have not yet invested in QXO, sources added. Jacobs, a seasoned CEO and serial entrepreneur, has a track record of establishing and scaling companies to billion-dollar valuations. His notable successes include XPO, Inc. and United Rentals (NYSE:URI), Inc., which are among the top performers in the Fortune 500 stocks of the last decade, as reported by Bloomberg market data. Throughout his career, Jacobs has executed approximately 500 acquisitions and raised over $40 billion in institutional capital.

This article first appeared in Investing.com