ABC Supply Co. agreed to buy L&W Supply from USG Corp. (NYSE: USG) for $670 million in cash. The transaction will allow USG to focus on developing new products.
L&W, located in Chicago, distributes drywall, ceiling tiles and steel framing materials to commercial and residential contractors. The target generated $1.4 billion in revenue in 2015.
ABC, based in Beloit, Wisconsin, sells products that are used to build roofing, siding and windows and doors, and posted about $5.9 billion in sales in 2015. The company says the addition of L&W will give it a chance to expand into interior building supplies. After the transaction closes, the combined company will operate more than 700 locations and have about $8 billion in annual sales.
“The sale of L&W Supply is transformative for USG Corp., enabling to right size our balance sheet and accelerate profitable growth,” says USG CEO James Metcalf. USG, headquartered in Chicago, produces ceiling panels, wallboards and suspension systems.
The uptick in new home sales is driving M&A in the construction sector. According to the U.S. Census Bureau, sales of new single family homes rose to 654,000 in July from 582,000 in June. Earlier in 2016, Apollo Global Management LLC (NYSE: APO) bought two crane companies; Hardwoods Distribution Inc. (TSX: HWD) acquired Rugby Architectural Building Products; and Hennessy Capital Acquisition Corp. II (Nasdaq: HCAC, HCACU and HCACW) announced plans to buy United Subcontractors Inc.
RBC Capital Markets are advising Deutsche Bank. Kirkland & Ellis, Leo Law along with McDermott Will & Emery are proving legal advice. J.P. Morgan Securities LLC (NYSE: JPM) and Goldman Sachs & Co. (NYSE: GS) are advising USG, which is being represented by Jones Day.