QXO Proposes $50 Billion Acquisition of GMS, Offering 27% Premium

QXO, a leading company in the building products distribution sector, has proposed acquiring GMS, a prominent building products distributor, for approximately $50 billion. The offer, announced in a statement on Wednesday, values each share of GMS at $95.20, which is a 27% premium over GMS's volume-weighted average price over the past 60 days, which was $74.82.

Ihsan Essaid, the Chief Financial Officer of QXO, emphasized the straightforward and swift nature of the proposal in a letter to GMS. He stated, "We don't play games—we are direct and swift. In that spirit, we have made an extremely attractive offer, priced at the top of our valuation range." This move underscores QXO's aggressive strategy in the market, aiming to solidify its position as a dominant player in the building products distribution industry.

GMS, headquartered in Tucker, Georgia, saw its stock price rise nearly 11% on Wednesday, closing at $81.01 per share. This surge increased the company's market capitalization to $31 billion. Post-market, GMS's stock price further climbed by 17.27%, reaching approximately $95 per share.

QXO's aggressive expansion strategy is evident in its recent acquisitions. Earlier this year, in March, QXO agreed to acquire Beacon Roofing Supply, a company specializing in the distribution of roofing, waterproofing, and exterior building products. The deal, valued at around $110 billion including debt, marked the culmination of months of negotiations and averted a potential hostile takeover battle. Following this acquisition, QXO became the largest publicly traded building products distributor in the United States, encompassing roofing materials, waterproofing materials, and complementary building products.

QXO's stock price has surged by 42% this year, bringing its market capitalization close to $130 billion. On Wednesday, QXO's stock price also rose by 11.66%, reflecting investor confidence in the company's strategic acquisitions and growth prospects.

In its proposal, QXO expressed willingness to sign a confidentiality agreement with GMS, provided it does not include any "standstill provisions" that would hinder QXO's ability to make a direct offer to GMS shareholders. QXO has engaged financial advisors and legal counsel for this transaction. The company has set a deadline for GMS to respond to the proposal by Tuesday.

QXO's letter to GMS clearly stated its intentions: "If you choose not to work with us, or choose to work with us in a non-constructive manner, we are prepared to take our proposal directly to GMS shareholders. We believe shareholders will find this proposal attractive." This direct approach highlights QXO's confidence in its offer and its readiness to engage with GMS shareholders if necessary.