BUILDING PRODUCTS & MATERIALS - Harris Williams · PAGE | BUILDING PRODUCTS & MATERIALS GROUP...
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www.harriswilliams.de
Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered withthe Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Ned Valentine, Mr. Paul Poggi, Mr. Thierry Monjauze and Mr. Aadil Khan, authorisedand regulated by the Financial Conduct Authority.
Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main,Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative(Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins.
BUILDING PRODUCTS & MATERIALSINDUSTRY UPDATE │ JULY 2016
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BUILDING PRODUCTS & MATERIALS GROUP OVERVIEW
1
CONTENTS
WHAT WE’RE READING
PUBLIC MARKETS
PUBLIC COMPARABLES
M&A ACTIVITY
CONTACTS
Mike HoganManaging Director
[email protected]+1 (804) 915-0104
Ryan NelsonManaging [email protected]+1 (804) 915-0121
Trey PackardVice [email protected]+1 (804) 887-6016
INTRODUCTION
Harris Williams & Co. is pleased to present our Building Products and MaterialsIndustry Update for July 2016. This report provides commentary and analysis oncurrent capital market trends and merger and acquisition dynamics within theglobal building products and materials industry.
We hope you find this edition helpful and encourage you to contact us directly ifyou would like to discuss our perspective on current industry trends and M&Aopportunities or our relevant industry experience.
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
OUR PRACTICE
Harris Williams & Co. is a leading advisor to the building products and materialsindustry. Our significant experience covers a broad range of end markets,industries, and business models.
Aggregates
Aluminum
Asphalt
Bricks
Clay
Glass
Precast / Ready-Mix
Concrete
Steel
Stone
Acoustical
Cabinets and
Countertops
Carpet and Flooring
Gypsum / Wallboard
Electrical Fixtures
HVAC
Lumber
Plumbing Fixtures
Roofing
Siding
Tools and Hardware
Windows and Doors
Architectural and
Engineering
Installation and
Contracting
Lumber and
Hardware
Plumbing
Roofing and Siding
Site Development
Wallboard
Construction
MaterialsBuilding Products
Distribution &
Services
www.harriswilliams.de
Construction
Materials
Building
Products
Distribution &
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a portfolio company of
Select Atlanta, Georgia
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RECENT MOMENTUM IN BUILDING PRODUCTS & MATERIALS
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
has been acquired by
a portfolio company of
Generation Brands
Leading designer of decorative and functional lighting products serving residential and commercial construction markets through six distinct brands
Provides a comprehensive line of lighting fixtures to 4,000+ showrooms, electrical distributors, homebuilders, and online retailers
Maintains a portfolio of leading brands averaging 60+ years in operation
Boxley Materials
A vertically-integrated producer of construction materials, primarily supplying aggregate, ready-mix concrete, asphalt and paving, and architectural products in central and southwestern Virginia
Boxley’s high-quality products, superior customer service, and strong culture make it the supplier of choice in its markets
Maintains a high-quality asset base of aggregate reserves with modernized plants and equipment
Ennis-Flint
A global leader in pavement markings and traffic safety solutions
#1 market position across its core portfolio of products, serving a highly-diverse base of over 4,000 customers
Global manufacturing presence with 20 facilities across six countries worldwide
Harvey
Leading building products supplier focused on Northeast region
Founded in and family-owned since 1961, with headquarters outside Boston in Waltham, MA
Vertically-integrated window and door manufacturer and distributor
Distributes broad line of exterior building products including windows, siding, and roofing to over 44,000 customers annually through its network of 33 warehouses
2
has been acquired by
has been acquired by
a portfolio company of
has been acquired by
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WHAT WE’RE READING
3
CONSTRUCTION EMPLOYMENT STAGNANT IN JUNE AS UNEMPLOYMENT RATE FALLS TO 16-YEAR LOW
10 YEARS AFTER PEAK, HOME PRICES ARE RISING
LOW INVENTORY WILL CONTINUE TO PLAGUE HOUSING MARKET THROUGH 2016
MAY CONSTRUCTION STARTS RISE 5%
Construction Dive 7/8/2016
The shortage of housing inventory will continue to be the market's big story for the second half of 2016, Forbes reported. According to Zillow, May inventory of low- (8.9%) and middle-tier (9.7%) homes dropped from May 2015, while top-tier inventory fell 0.5%. In May, the annual rate of single-family home groundbreakings was 1.138 million, below the projected 1.5 million necessary to catch up to demand; however, builders are focusing on luxury homes, pushing those entry-level buyers looking for a starter home further out of the market.
Read the full article here.
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
U.N. PUSHES SUSTAINABLE URBAN DEVELOPMENT
Construction Dive 7/11/2016
Construction employment remained unchanged at 6,643,000 from May to June but was up 3.4% (217,000) year overyear, according to an analysis of U.S. Bureau of Labor Statistics data by the Associated General Contractors ofAmerica. The construction unemployment rate dipped to 4.6% month over month, the lowest rate since 2000. Wagesgrew 2.8% from June 2015 to $28.13, and weekly hours worked increased to 39.2 for the same period, indicating thatconstruction employers are experiencing difficulty finding skilled workers.
Read the full article here.
Dodge 6/24/2016
At a seasonally adjusted annual rate of $636.7 billion, new construction starts in May increased 5% from April,according to Dodge Data & Analytics. Much of the growth came from the non-building construction sector (publicworks and electric utilities), which was lifted by a $3.8 billion oil pipeline in the upper Midwest as well as by sevenpower plant projects with a combined cost of $4.3 billion.
Read the full article here.
CityLab 7/8/2016
Late September is always a busy time at the United Nations, but last year’s General Assembly session was especiallyhistoric. That’s when all 193 nations represented at the U.N. formally agreed to an ambitious set of 17 “SustainableDevelopment Goals” — a framework to coordinate global efforts for ending poverty and hunger, combatinginequality and disease, slowing climate change and building peace. Pope Francis, Nobel laureate Malala Yousafzaiand the pop singer Shakira all took the stage in support. Many of the world’s mayors were there, too. They came toemphasize the vital role cities have to play in this global effort.
Read the full article here.
Remodeling 7/17/2016
It’s been 10 years since the peak of the U.S. home price bubble. David Stiff, for CoreLogic, notes that CoreLogic'sCase-Shiller Home Price Index dropped 27% during the next six years after reaching its peak in July 2006. Now, thenational index remains 4% below its peak. But in certain markets, prices have rebounded nicely. In 40% of metros,prices are at new peaks and another 30% are within 10% of their previous peak. Stiff adds that the country should notfear another housing market crash in the near future because its current success is built on fundamentals, like jobgrowth and rising demand.
Read the full article here.
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ECONOMIC UPDATE
4
INDUSTRIAL PRODUCTION INDEX
BUILDING PRODUCTS & MATERIALS
GROSS DOMESTIC PRODUCT
Real GDP increased by an annual rate of1.1% in the first quarter of 2016, and hasincreased 2.1% YoY
Current dollar GDP increased 0.4%, or$65.3 billion in the first quarter to a level of$18.2 trillion
The Gross Domestic Income (GDI), whichmeasures the value of the production ofgoods and services in the U.S. as the costsincurred and the incomes earned inproduction, increased 0.7% in the firstquarter of 2016
Industrial production decreased 0.4% inMay after increasing 0.6% in April; it is down1.4% YoY since May 2015
Capacity utilization for the industrial sectorfell 0.3% in May to 74.9% and is down 1.7%since May 2015
Seasonally-Adjusted
Seasonally-Adjusted
(QoQ percentage change)
(Indexed to 2012)
INDUSTRY UPDATE │ JULY 2016
Source: Federal Reserve
Source: Bureau of Economic Analysis
(2.5%)
(2.0%)
(1.5%)
(1.0%)
(0.5%)
0.0%
0.5%
1.0%
1.5%
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
2011
Q1
2012
Q1
2013
Q1
2014
Q1
2015
Q1
2016
94
96
98
100
102
104
106
108
110
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ECONOMIC UPDATE
5
PERSONAL CONSUMPTION EXPENDITURES
ECONOMIC SENTIMENT
In May, personal income decreased$23.1 billion, or 3.1%, while personalconsumption expenditures (PCE)increased $53.5 billion, or 0.4%
Wages and salaries were flat in March,after being flat in February andincreasing 0.7% in January
Purchases of durable goods fell 2.3% inMay compared to an increase of 3.2% inApril; while purchases of non-durablegoods increased 0.5%, compared to anincrease of 0.1% in April
The Leading Economic Index (LEI)measures how consumers view prospectsfor their own financial situation, how theyview the near-term general economyprospects, and their long-term view ofeconomic prospects
The LEI for the U.S. decreased by 0.2% inMay to 123.7, following a 0.6% increase inApril, and a 0.1% increase in March
Even with the May decrease, the LEI is up1.2% YoY since May 2015
The continued rise in LEI suggests economicgrowth will remain moderate in 2016 withlittle reason to expect growth to pick upsubstantially
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
(Percentage change in 3-month rolling average)
(Indexed to 2010)
Source: Conference Board Leading Economic Index (LEI)
Source: Federal Reserve
(0.2%)
(0.1%)
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
May-10 May-11 May-12 May-13 May-14 May-15 May-16
100
105
110
115
120
125
130
May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16
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ECONOMIC UPDATE
CONSUMER CONFIDENCE INDEX (CCI)
KEY INTEREST RATES
The Consumer Confidence Indexincreased to 98.0 in June, up from 92.4 inMay
Consumer confidence is currently up0.2% over the last six months, and down1.8% since June 2015
Consumers’ appraisal of currentconditions was mixed in June. Thosesaying business conditions are “good”increased from 26.1% to 26.9%; thosesaying business conditions are “bad”decreased from 21.4% to 17.7%
Consumers had mixed feelings aboutthe labor market. The proportionclaiming jobs are “plentiful” decreasedfrom 24.5% to 23.4%, but those claimingjobs are “hard to get” also decreased to24.5% from 23.3%
The 30-year mortgage rate decreased inJune 2016 to 3.57%
The current mortgage rate is 40 basispoints lower than the rate from June 2015
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Seasonally-Adjusted
(Indexed to 1985)
Source: Federal Reserve
Source: Conference Board
0%
1%
2%
3%
4%
5%
6%
7%
8%
30-Year Treasury Rate
10-Yr Treasury Rate
Effective Federal Funds Rate
0
20
40
60
80
100
120
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ECONOMIC UPDATE
U.S. NON-RESIDENTIAL CONSTRUCTION
U.S. HOUSING STARTS
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Non-residential construction has laggedin recovery but has increased 1.2% sinceMay of 2015
Non-residential construction decreasedby 1.3% from April to May, but hasincreased 0.8% over the last six months
In the release of its estimates forNovember 2015, the U.S. Census Bureaurestated each of its monthly estimatesgoing back to January 2005, citing aprocessing error in the tabulation of data
Seasonally-Adjusted Annual Rate
($ in billions)
U.S. housing starts in May decreased 0.3%over April, and increased 9.5% YoY
Decreases were driven by a 1.2% MoMdecrease in multi-family homes whilesingle-family homes increased 0.3%
Housing starts continue to rebound fromunprecedented lows reached in 2009,yet remain ~20% below the 50-yearaverage of 1.4 million starts per year
(Units in 000’s)
May 2016 Annualized Starts: 1,164MoM Δ: (0.3%)YoY Δ: 9.5%
Source: U.S. Census Bureau
Source: U.S. Census Bureau
50-year average of 1,441 starts
(12.0%)
(8.0%)
(4.0%)
0.0%
4.0%
8.0%
12.0%
$450
$500
$550
$600
$650
$700
$750
Non-Residential Construction MoM Change
0
500
1,000
1,500
2,000
2,500
3,000
1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016
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30
35
40
45
50
55
60
65
70
Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016
8
ECONOMIC UPDATE
RESIDENTIAL HOUSING SPENDING
NAHB REMODELING MARKET INDEX (RMI)
Total residential building spending for2016 is projected to be $412 billion, 7.3%up from $382 billion in 2015
Residential building spending increasedat a 10.0% CAGR between 2012 and2015
FMI projects that spending will increaseat an 8.6% CAGR from 2016E through2019P
The Q1 RMI was 68 and has not dippedbelow 50 since Q3 2009
The overall RMI averages the indicatorsof current and future remodeling activity.An RMI over 50 indicates that remodelersare reporting higher activity than theprevious quarter
On a seasonally-adjusted basis, RMIposted a decline of 12.7% year-over-yearin the first quarter
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
2016E – 2019P CAGR: 8.6%
$249$253
$287
$342 $354$382
$412$447
$486
$527
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016E 2017P 2018P 2019P
Single-Family Multi-Family Improvements*
*Improvements includes additions, alterations, and major replacements. Itdoes not include maintenance and repairs.
($ in billions)
Source: FMI Consulting
2012 – 2015 CAGR: 10.0%
Source: NAHB
Seasonally-Adjusted Annual Rate
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0
10
20
30
40
50
60
70
80
9
M&A MARKET TRENDS
MARKET OBSERVATIONS
BUILDING PRODUCTS QUARTERLY M&A ACTIVITY
After a record year for M&A in 2015, 16.2% higher than 2007’s previous peak, there has been a cooling downperiod through the first half of 2016, with global M&A re-balancing towards a more sustainable level
First half 2016 global M&A volume totaled $1.5 trillion
– Activity in Western Europe accounted for nearly one third of global M&A volume, with North Americaaccounting for just over 20%
North American building products deal activity was up 8.0% in Q2 compared to Q1 2016
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Note: Includes all building products or construction materials M&A transactions announced in the U.S. or Canada
Total Transactions: 270
YoY Change: 55.2%
Total Transactions: 263
YoY Change: (2.6%)
Total Transactions: 267
YoY Change: 1.5%
Total Transactions: 217
YoY Change: (18.7%)
Total Transactions: 242
YoY Change: 11.5%
Total Transactions: 234
YoY Change: (3.3%)
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
Q1 2015
Source: Mergermarket
Q1 2016
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SELECT SECTOR OVERVIEWS & TRENDS
LUMBER AND WOOD PRODUCTS
ROOFING
WINDOWS AND DOORS
Description
Lumber, boards, beams, bolts oriented strand board, poles, shingles,siding, and wood chips
Industry Commentary:
70% of U.S. lumber demand is driven by housing, including newconstruction and remodeling
Prices have strengthened over the past quarter after their depressedlevels from Q4 2015 through Q1 2016
Stable price growth points to continued recovery in the broader
construction market
Framing Lumber Composite Price Index($ per thousand board feet)
Description
Roofing market includes bituminous, wood, and tile roofing used in residentialapplications and metal elastomeric and plastic roofing used in non-residential applications
Industry Commentary:
U.S. demand for roofing is projected to rise 3.9% annually to 252 millionsquares in 2019, valued at approximately $21.4 billion dollars
Demand for roofing is closely linked to building construction expenditures, buthas been more sheltered than other building products markets from thehousing slump due to the non-discretionary need for roof repair andreplacement
Houses need to be re-roofed every fifteen years on average and the agingU.S. housing stock will drive continued demand for replacement
Additionally, renewed strength in new housing construction and a generallystronger economic climate will support growth
Roofing Demand by Primary Segment
Description
Windows and doors market includes metal, wood, and vinyl windowsand doors for residential and non-residential end markets
Industry Commentary:
Window and door demand is primarily driven by new commercial andresidential construction, as well as repair and remodel spending
Quarterly remodeling spend decreased 0.6% during Q1 2016, following adip in Q4 2015. Spend for Q1 was ~$141 billion
Continued strength in home prices has increased homeowners’ equityand demand for remodeling work, providing a strong tailwind for thewindow and door industry
Leading Indicator of Remodeling Activity – LIRA ($ in billions)
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Residential
Reroofing
44%
Non-Residential
Reroofing
37%
New Residential
11%
New Non-
Residential
8%
Source: Random Lengths
Source: Freedonia
Source: Joint Center for Housing Studies of Harvard University
$100
$200
$300
$400
$500
$80
$130
$180
$230
$280
$330
$380
Q1 '13 Q1 '14 Q1 '15 Q1 '16 Q1 '17
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SELECT SECTOR OVERVIEWS & TRENDS
11
WALLBOARD AND PLASTER
HVAC
PLUMBING FIXTURES AND FITTINGS
Description
Primarily made from gypsum, products include wallboard, plaster,plasterboard, molding, ornamental moldings, statuary, andarchitectural plasterwork
Industry Commentary:
Gypsum product demand is primarily driven by new commercial andresidential construction, as well as repair and remodel spending
Over the past two years, rising wallboard prices and cost-savingmeasures have improved industry profit margins
New home inventories remain low and as demand for new homes hasgrown, builders have begun increasing their stock
U.S. Wallboard Demand Outlook
($ in millions)
U.S. HVAC Demand Outlook($ in millions)
Plumping Equipment Industry Revenue Outlook($in millions)
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Description
Residential, commercial, and industrial heating, ventilation, airconditioning, and refrigeration equipment
Industry Commentary:
U.S. shipments of central air conditioners and air-source heat pumpsdropped modestly in 2015 compared to 2014
HVAC demand is primarily driven by residential and non-residentialconstruction, HVAC replacement, and weather patterns
Aging domestic buildings (75% of buildings were built before the 1980s)are fueling the demand for replacement equipment
New minimum energy efficiency standards for air conditioning andcorresponding tax credits are driving replacement demand
Turnaround specialists Melrose Industries announced the acquisition ofNortek, a U.S. public company offering a variety of home productsincluding ventilation, for $1.4 billion on July 6th, 2016
Description
Plumbing fixtures, bathtub and shower fixtures, and indoor pipesconstitute this segment
Industry Commentary:
Through 2018, U.S. demand for plumbing fixtures and fittings isprojected to advance ~3% annually to nearly $55 billion
Primary demand determinants are repair and remodel spending, newhome construction, and non-residential improvement and repair
Industry regulatory bodies continue to focus on water efficiency, withstates leading the way on new codes
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
2007 2009 2011 2013 2015 2017P
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
2007 2009 2011 2013 2015 2017P
Source: IBIS World
Source: IBIS World
Source: IBIS World
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2007 2009 2011 2013 2015 2017P
PAGE |
1,200 1,200 1,200 1,220 1,230 1,310 1,390
838 807 812 820 850904
931
0
500
1,000
1,500
2,000
2,500
2009 2010 2011 2012 2013 2014 2015Crushed Stone Sand/Gravel
SELECT SECTOR OVERVIEWS & TRENDS
12
AGGREGATES
ASPHALT
CEMENT AND CONCRETE
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Description
Broad category of materials such as crushed rock, manufactured sand,natural sand, and gravel
Most-used material in the world, after water
Industry Commentary:
Markets are local in nature due to high shipping costs
Major players include Lafarge, CEMEX, CRH, Heidelberg Cement, MartinMarietta, Vulcan Materials, and a large number of independentoperators
White limestone loadings in the U.S. have decreased of late, but demandis expected to grow strongly in the coming years
U.S. Aggregates Consumption (values in millions of metric tons)
Description
Paving and roofing materials include asphalt and tar-paving mixtures andblocks, shingles, roofing cements, and coatings
Industry Commentary:
Asphalt is used over 85% of the time in U.S. highway and road construction
Resurgent U.S. housing activity and recent government infrastructureprograms have supported asphalt shingle and roofing cement demand
According to the National Asphalt Paving Association (NAPA), nearly athird of all asphalt is produced with warm-mix asphalt technologies, upfrom less than 5% in 2009
U.S. Refinery Net Production of Asphalt and Road Oil (thousands of barrels)
Description
Portland, natural, masonry, pozzolanic, and other hydraulic cements
Typically, manufacturers also thermally treat and mine or quarry lime
Industry Commentary:
U.S. cement consumption historically has exceeded domestic productioncapacity
Concrete has been gaining share over asphalt since 2008
U.S. cement capacity and import terminals are largely owned orcontrolled by international producers
The recent passage of the FAST act provides some certainty for thecement and concrete industry, but industry leaders are still calling forincreased funding to support a refurbishing of U.S. water infrastructure anda modernized airport system
U.S. Cement Demand Outlook ($ in millions)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
2007 2009 2011 2013 2015 2017P
Source: U.S. Geological Survey
Source: U.S. Energy Information Administration
Source: IBIS World
0
4,000
8,000
12,000
16,000
20,000
PAGE |
PUBLIC MARKETS
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
13
MEDIAN TEV / 2016E EBITDA
MEDIAN REVENUE GROWTH (2016E – 2017P)
MEDIAN EBITDA MARGIN (2012 – 2016E) MEDIAN EBITDA MARGIN (2016E – 2017P)
MEDIAN CAPEX / 2016E REVENUE
MEDIAN REVENUE GROWTH (2012 – 2016E)
HISTORICAL STOCK PRICES (JULY 14TH, 2011 – JULY 14TH, 2016)
HISTORICAL MEDIAN TEV / NTM EBITDA (JULY 14TH, 2011 – JULY 14TH, 2016)
60
80
100
120
140
160
180
200
220
240
Building Products Index
Building Products Distributors Index
Construction Materials Index
S&P 500 Index
6.0x
7.0x
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
Building Products Index
Building Products Distributors Index
Construction Materials Index
S&P 500 Index
8.7x
8.8x
9.4x
Construction Materials
Building Products Distributors
Building Products
9.2%
8.1%
6.9%
Construction Materials
Building Products Distributors
Building Products
7.5%
8.8%
5.8%
Construction Materials
Building Products Distributors
Building Products
19.2%
6.6%
15.6%
Construction Materials
Building Products Distributors
Building Products
14.9%
4.9%
12.6%
Construction Materials
Building Products Distributors
Building Products
6.3%
1.1%
3.3%
Construction Materials
Building Products Distributors
Building Products
PAGE |
PUBLIC COMPARABLES
14
BUILDING PRODUCTS
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
As of July 14, 2016
Building Products
Stock Performance
Current % of 2016E TEV / EBITDA EBITDA
($ in millions except per share data) Price LTM High Mkt. Cap TEV Rev. EBITDA Current 2016E 2017P
Windows & Doors
Masonite International Corp. $66.85 91.3% $1,863 $2,518 $2,027 $254 12.5% 9.9x 8.5x
Ply Gem Holdings, Inc. 14.30 91.0% 854 1,904 1,964 232 11.8% 8.2x 7.0x
Tyman Plc 3.19 60.8% 749 659 572 95 16.6% 6.9x 6.2x
Quanex Building Products Corporation 19.02 87.8% 641 936 963 118 12.2% 7.9x 7.1x
PGT, Inc. 10.37 63.7% 556 758 466 82 17.5% 9.3x 7.8x
Median 87.8% $963 $118 12.5% 8.2x 7.1x
Roofing, Decking & Siding
Kingspan Group Plc $20.22 70.0% $4,675 $4,022 $3,390 $395 11.7% 10.2x 9.7x
USG Corporation 26.65 81.1% 3,538 5,478 3,996 689 17.2% 8.0x 7.1x
Trex Company, Inc. 45.03 89.0% 1,176 1,482 472 117 24.9% 12.6x 11.1x
Continental Building Products, Inc. 22.09 92.9% 729 1,190 454 140 30.9% 8.5x 7.9x
Median 85.0% $1,931 $268 21.0% 9.3x 8.8x
Cabinets, Plumbing / HVAC
Masco Corporation $30.55 92.8% $9,353 $12,309 $7,445 $1,187 15.9% 10.4x 9.5x
Fortune Brands Home & Security, Inc. 57.76 96.3% 8,875 10,525 5,106 773 15.1% 13.6x 11.9x
Lennox International Inc. 142.65 99.1% 5,580 7,436 3,650 523 14.3% 14.2x 12.9x
American Woodmark Corporation 67.63 75.2% 1,186 936 1,058 119 11.2% 7.9x 6.9x
Median 94.5% $4,378 $648 14.7% 12.0x 10.7x
Hardware
ASSA ABLOY AB $19.94 89.9% $23,452 $24,841 $8,397 $1,513 18.0% 16.4x 15.0x
Simpson Manufacturing Co., Inc. 39.32 97.1% 1,645 1,673 859 167 19.4% 10.0x 9.0x
Richelieu Hardware Ltd 20.21 99.5% 1,044 1,202 654 73 11.1% 16.5x 14.9x
Median 97.1% $859 $167 18.0% 16.4x 14.9x
Glass / Building Systems
Owens Corning $52.60 98.9% $5,451 $8,066 $5,578 $978 17.5% 8.2x 7.6x
Apogee Enterprises, Inc. 46.15 79.1% 1,130 1,289 1,077 155 14.4% 8.3x 7.2x
NCI Building Systems, Inc. 16.00 96.2% 775 1,507 1,675 158 9.4% 9.6x 8.2x
Median 96.2% $1,675 $158 14.4% 8.3x 7.6x
Flooring
Mohawk Industries, Inc. $186.19 87.8% $14,001 $17,051 $8,938 $1,666 18.6% 10.2x 9.6x
Armstrong World Industries, Inc. 37.71 62.1% 2,532 2,923 1,376 324 23.6% 9.0x 8.5x
Interface, Inc. 15.29 56.3% 1,261 1,154 995 144 14.4% 8.0x 7.1x
Median 62.1% $1,376 $324 18.6% 9.0x 8.5x
Overall Median 89.4% $1,525 $199 15.5% 9.4x 8.3x
PAGE |
PUBLIC COMPARABLES
15
BUILDING PRODUCTS DISTRIBUTORS
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
1) Pro forma EBITDA figures from the presentation for the Rugby Architectural Building Products acquisition
As of July 14, 2016
Building Products Distributors
Stock Performance
Current % of 2016E TEV / EBITDA EBITDA
($ in millions except per share data) Price LTM High Mkt. Cap TEV Rev. EBITDA Current 2016E 2017P
Wolseley plc $5.02 72.4% $17,412 $14,756 $19,759 $1,525 7.7% 9.7x 9.2x
HD Supply Holdings, Inc. 33.86 92.0% 5,257 10,837 7,548 960 12.7% 11.3x 10.4x
Beacon Roofing Supply, Inc. 46.18 98.0% 1,618 3,797 4,184 348 8.3% 10.9x 9.9x
Builders FirstSource, Inc. 11.26 67.5% 1,216 3,161 6,540 421 6.4% 7.5x 6.2x
BMC Stock Holdings, Inc. 17.66 88.3% 1,094 1,575 3,154 186 5.9% 8.4x 6.9x
Hardwoods Distribution Inc. 12.14 85.4% 217 233 990 65 6.6% 4.7x 3.8x
CanWel Building Materials Group Ltd. 4.25 88.0% 146 343 746 39 5.3% 8.7x 7.1x
Huttig Building Products, Inc. 6.00 93.5% 95 209 710 21 3.0% 9.9x 7.7x
Goodfellow Inc. 8.48 92.5% 66 149 452 17 3.8% 8.8x 8.3x
Overall Median 88.3% $3,154 $186 6.4% 8.8x 7.7x
1
PAGE |
PUBLIC COMPARABLES
16
CONSTRUCTION MATERIALS
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
As of July 14, 2016
Construction Materials
Stock Performance
Current % of 2016E TEV / EBITDA EBITDA
($ in millions except per share data) Price LTM High Mkt. Cap TEV Rev. EBITDA Current 2016E 2017P
Aggregates and Cement
LafargeHolcim Ltd. $40.71 53.0% $30,430 $48,133 $29,624 $6,374 21.5% 7.6x 7.5x
CRH Plc 27.88 88.4% 23,708 30,441 31,319 3,503 11.2% 8.7x 7.9x
HeidelbergCement AG 73.60 80.1% 15,437 21,187 15,623 3,235 20.7% 6.5x 5.8x
Vulcan Materials Company 119.66 98.7% 12,647 17,998 3,924 1,106 28.2% 16.3x 13.2x
Martin Marietta Materials, Inc. 186.77 96.3% 8,807 13,747 3,654 1,032 28.2% 13.3x 11.2x
Eagle Materials Inc. 76.11 87.4% 3,402 4,313 1,227 422 34.4% 10.2x 9.0x
Summit Materials, Inc. 20.05 73.0% 1,197 2,561 1,541 369 23.9% 6.9x 6.0x
Median 87.4% $3,924 $1,106 23.9% 8.7x 7.9x
Heavy Construction Materials
James Hardie Industries PLC Chess Units of Foreign Securities$15.44 96.7% $6,122 $7,338 $1,893 $497 26.2% 14.8x 13.1x
Boral Limited 4.56 88.5% 3,436 4,206 3,301 478 14.5% 8.8x 8.2x
Headwaters Incorporated 17.80 81.8% 1,389 1,852 1,002 195 19.5% 9.5x 8.4x
U.S. Concrete, Inc. 59.54 85.5% 783 1,168 1,210 170 14.0% 6.9x 5.9x
Median 87.0% $1,551 $336 17.0% 9.1x 8.3x
Cabinets, Plumbing / HVAC
Weyerhaeuser Company $29.70 90.8% $15,304 $27,608 $7,304 $1,815 24.8% 15.2x 13.3x
West Fraser Timber Co. Ltd. 28.72 52.2% 3,118 2,910 3,450 472 13.7% 6.2x 5.0x
Louisiana-Pacific Corporation 17.39 91.7% 2,575 2,875 2,181 275 12.6% 10.5x 9.5x
Canfor Corporation 10.29 46.3% 1,930 1,997 3,264 370 11.3% 5.4x 4.5x
Universal Forest Products, Inc. 95.27 99.2% 1,387 1,955 3,124 202 6.5% 9.7x 9.1x
Norbord Inc. 19.13 85.2% 1,657 2,431 1,722 309 17.9% 7.9x 6.5x
Boise Cascade Co. 21.43 58.0% 991 1,226 3,921 160 4.1% 7.7x 6.1x
Median 85.2% $3,264 $309 12.6% 7.9x 6.5x
Overall Median 86.5% $3,282 $447 18.7% 8.7x 8.1x
PAGE |
M&A TRANSACTIONS
17
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Announced
DateTarget Vertical Business Description Acquirer
7/7/2016 Marketing Associates, Inc.
(North Carolina)
Building Products Manufactures, supplies, and installs specialist construction products,
including bridge expansion joints, concrete repair compounds,
protective coatings, and pavement preservation products.
RPM International, Inc.
7/6/2016 Nortek, Inc. Building Products Manufactures and distributes building ventilation products for residential
and commercial applications.
Melrose Industries Plc
7/6/2016 RockWise LLC Building Products Supplies drywall and stucco to professional contractors in Arizona and
Colorado.
GMS, Inc.
6/29/2016 Eastern Industries Corp. Construction Materials The company provides building supplies, hot-mix asphalt, masonry block,
ready-mix concrete, road oils, stone and other construction materials.
Precision Punch Corp.
6/27/2016 NYCON Supply Corp. Construction Materials Supplies concrete products for construction, municipal work, road
construction, city sidewalks, and homeowners projects.
U.S. Concrete, Inc.
6/22/2016 Lake States Lumber, Inc. Building Products
Distribution
Wholesales and distributes building materials. I t offers manufacturing,
factory refinishing, and wood preserv ing.
Cedar Creek, Inc.
6/15/2016 The Bilco Co. Building Products Manufactures building products. I t offers roof hatches, smoke vents,
floor access doors, safety products, intrusion detection, bilco basement
doors, egress window wells, and perm entry entrance.
Tyman Plc
6/13/2016 Ennis-Flint Building Products Ennis-Flint is the world leader in pavement markings and traffic safety
solutions.
Olympus Partners
6/13/2016 Rugby Architectural
Building Products
Building Products
Distribution
Rugby Architectural Building Products distributes non-structural
architectural grade building products to customers that supply end-
products to the commercial market.
Hardwoods Distribution
6/13/2016 Lumotech, Certain assets
in Europe
Building Products Lumotech is a manufacturer of specialty LED products with a focus on
rechargeable, emergency lighting.
Fulham Company Group
6/10/2016 Generation Brands Building Products Generation Brands is a leading designer of decorative and functional
lighting products serv ing residential and commercial construction
markets.
AEA Investors
6/10/2016 Panolam Surface Solutions Building Products Panolam Surface Systems is a designer and manufacturer of highly-
engineered, integrated surface solutions including high-pressure
laminates, thermally-fused laminates, and other specialty products.
Insight Equity
6/8/2016 Exteria Building Products Building Products Exteria Building Products LLC manufactures sides, windows, fascia,
roofing, and gutters serv ices. I ts products include cape cod perfection,
scalloped perfection, hand-split shake, and cedar pride.
Novik Inc.
6/7/2016 Monofrax Building Products Monofrax is engaged in the manufacturing of fused cast refractory for
glass manufacturers.
Callista Private Equity
6/6/2016 KITH Kitchens LLC Building Products KITH Kitchens LLC provides customizable kitchen and bath cabinets. I t
offers full lines of both framed and frameless cabinetry with an expertise
in hand-painted finishes.
Pfingsten Partners LLC
6/2/2016 Johnson Insulation, Certain
assets
Building Products
Distribution
Johnson Insulation specializes in laminating metal building insulation. Distribution International
6/1/2016 Raymond Building Supply
Corp.
Building Products
Distribution
Raymond Building Supply Corp. supplies residential and commercial
building products. I ts products include millwork, plywood, trusses ,and
Andersen windows.
U.S. LBM
6/1/2016 Woodfeathers, Inc. Building Products Woodfeathers, Inc. manufactures and supplies roofing materials to
homeowners, builders, architects, and contractors.
Beacon Roofing Supply,
Inc.
5/26/2016 Albuquerque Hardwood
Lumber Co.
Building Products
Distribution
Albuquerque Hardwood Lumber Co. wholesales and supplies wood
products. I t sells hardwood lumber, wood panels, and related
hardware.
Rugby IPD Corp
5/24/2016 TekModo Building Products TekModo is a manufacturer and seller of composite panels that are
currently being used in the walls, roofs, floors and doors of RVs, buses
and trailers.
CarbonOne Technologies
PAGE |
M&A TRANSACTIONS
18
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Announced
DateTarget Vertical Business Description Acquirer
5/20/2016 Lamin-Art, Inc. Building Products Lamin-Art designs and manufactures laminates and decorative
surfaces.
Arborite
5/9/2016 Universal Building
Specialties Incorporated
Building Products
Distribution
Universal Building Specialties Incorporated distributes building products. Cedar Creek Inc.
5/6/2016 SEI Group, Inc. Building Products SEI Group, Inc. prov ides construction contracting serv ices for single
and multi-family homes.
Narrow Gauge Capital
5/4/2016 Sierra Ready Mix, LLC Construction Materials Sierra Ready Mix, LLC supplies ready mix concrete in Las Vegas,
Nevada.
Summit Materials, Inc.
5/2/2016 CEMEX, S.A.B. de C.V.,
Certain assets in U.S.
Construction Materials CEMEX, S.A.B. de C.V., Certain assets in U.S. comprises cement plants,
three cement terminals, and the building materials business.
Grupo Cementos de
Chihuahua SAB de CV
5/2/2016 Fox Brothers Company Building Products
Distribution
Fox Brothers Company supplies exterior building materials for new
construction and remodeling projects in Michigan.
Beacon Roofing Supply,
Inc.
4/30/2016 Masonite Architectural
Door Company, Plant in
Fredericksburg
Building Products Masonite Architectural Door Company's plant in Fredericksburg was
acquired by The Lester Group, Inc. The plant manufactures and pre-
finishes commercial doors.
The Lester Group, Inc.
4/29/2016 Surface Encounters LLC Building Products Surface Encounters LLC fabricates granite and quartz countertops for
kitchens, bathrooms, and bars in Michigan and Indiana.
Cutting Edge Countertops
Inc.
4/18/2016 Athabasca Minerals Inc.,
DML 150166, DML 150171
And DLO 150210
Construction Materials Athabasca Minerals Inc., DML 150166, DML 150171 And DLO 150210
comprise industrial minerals deposits.
Wayfinder Corp.
4/15/2016 United States Pipe and
Foundry Company, LLC
Building Products United States Pipe and Foundry Company, LLC manufactures and sells
fabricated/grooved ductile iron pipes and fittings for water and
wastewater industries in the United States and internationally.
Forterra Building Products
4/11/2016 Fomo Products, Inc. Building Products Fomo Products, Inc. manufactures low pressure polyurethane (PU) foam
insulation, sealants, adhesives, and spray foam systems in pressurized
packaging.
ICP Adhesives and
Sealants, Inc.
4/1/2016 House Of Threads, Inc. Building Products
Distribution
House Of Threads, Inc. markets and distributes fasteners. Wurth Group Of North
America Inc.
4/5/2016 Tierra Sol Ceramic Tile Ltd. Building Products
Distribution
Tierra Sol Ceramic Tile Ltd. distributes ceramic and porcelain tiles,
glass/metal products, natural stones, and setting products to designers,
architects, contractors, and retailers.
Shnier Gesco Limited
Partnership
4/5/2016 Blue Max Materials, Inc. Construction Materials Blue Max Materials, Inc. offers a selection of landscape and hardscape
materials to professional contractors and do-it-yourself homeowners for
their landscaping needs.
SiteOne Landscape Supply,
Inc.
4/4/2016 Benbilt Building Systems LP Building Products
Distribution
Benbilt Building Systems LP is engaged in the wholesale distribution of
doors to builders and remodelers.
Huttig Building Products
Inc.
4/5/2016 Boston Cedar, Inc. Building Products
Distribution
Distributes building materials including siding, trim, decking, railing, and
millwork products.
U.S. LUMBER GROUP, LLC
4/4/2016 United Subcontractors,
Inc.
Building Products United Subcontractors, Inc. prov ides insulation, specialty, and shell
construction serv ices for residential and commercial projects.
Hennessy Capital
Acquisition Corp.
4/1/2016 L. M. Scofield Company Construction Materials L. M. Scofield Company manufactures decorative concrete products. Sika AG
4/1/2016 Strickland Bridge, Inc. Construction Materials Strickland Bridge, Inc. manufactures concrete. U.S. Concrete, Inc.
4/1/2016 Atlantic Building Products,
Inc.
Building Products
Distribution
Atlantic Building Products, Inc. is a building supply dealer that prov ides
building products to contractors and homeowners.
Beacon Roofing Supply,
Inc.
PAGE |
M&A TRANSACTIONS
19
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
Announced
DateTarget Vertical Business Description Acquirer
4/1/2016 LYF-TYM Building Products
Co, Inc.
Building Products LYF-TYM Building Products Co, Inc. manufactures and distributes low-
maintenance exterior building products.
Beacon Roofing Supply,
Inc.
4/1/2016 Professional Handling and
Distribution, Inc.
Building Products
Distribution
Professional Handling and Distribution, Inc. distributes drywall and
related products for commercial and residential customers in the
greater Chicagoland and Rockford areas.
GMS Inc.
3/31/2016 American Lumber
Corporation
Building Products American Lumber Corporation, also known as ALCO Doors,
manufactures interior and entry door systems for commercial and
residential use.
U.S. LBM Holdings, LLC
3/30/2016 Design and Direct Source
LLC
Building Products Design and Direct Source LLC provides floor and wall tiles, and stone
and wood products for commercial projects.
Materials Marketing
Limited
3/23/2016 Squaw Canyon Prospect
In Paradox Basin
Construction Materials Squaw Canyon Prospect In Paradox Basin comprises a limestone
producing field in Utah.
Virtus Oil and Gas Corp.
3/15/2016 Colorado Precast
Concrete, Inc.
Construction Materials Colorado Precast Concrete, Inc. manufactures precast concrete
products.
Oldcastle Precast, Inc.
3/7/2016 Lithko Contracting, Inc. Construction Materials Lithko Contracting, Inc. prov ides concrete construction serv ices in the
United States.
The Pritzker Organization
3/7/2016 Serv ice Experts LLC Building Products
Distribution
Serv ice Experts LLC sells, repairs, and installs heating, ventilation, and air
conditioning equipment for home and commercial applications in North
America.
EnerCare Solutions Inc.
3/7/2016 3i Supply Company Building Products
Distribution
3i Supply Company distributes industrial and commercial insulation
products.
Distribution International,
Inc.
2/29/2016 Greco Bros. Ready Mix
Concrete Co., Inc.
Construction Materials Greco Bros. manufactures and markets ready-mixed concrete. Ferrara Brothers Building
Materials Corp.
2/29/2016 Parkland Plastics, Inc. Building Products Parkland Plastics, Inc. manufactures polymer-based architectural
panels.
Patrick Industries Inc.
2/29/2016 Eurobloq Inc. Construction Materials Eurobloq Inc. manufactures concrete. Brampton Brick Ltd.
2/25/2016 Royal Group Window &
Door Profiles Business,
(nka: ENERGI Fenestration)
Building Products Comprises window and door profiles manufacturing activ ities. OpenGate Capital, LLC
2/24/2016 InterWrap, Inc. Building Products InterWrap, Inc. manufactures coated woven packaging products and
multi-layer laminated reinforced plastic substrates.
Owens Corning
2/23/2016 Boxley Materials
Company, Inc.
Construction Materials Boxley Materials Company, Inc. produces and supplies various crushed
limestone, granite, and sandstone to contractors and road builders.
Summit Materials, Inc.
2/23/2016 Super-Krete International,
Inc.
Construction Materials Super-Krete International, Inc. manufactures concrete repair products
and restoration materials used to repair, waterproof, restore, enhance,
and protect concrete installations worldwide.
Arizona Polymer Flooring,
Inc.
2/23/2016 Deceuninck North
America, LLC, Deck and
Rail Business
Building Products Deceuninck North America, LLC designs, manufactures, and distributes
decking and railing products.
The Tapco Group
2/18/2016 Noble Company Building Products Noble Company manufactures building products for applications in tile,
plumbing, heating and cooling, and fire sprinkler industries.
Federal Process
Corporation
2/16/2016 USA Fastener Group, Inc. Building Products USA Fastener Group, Inc. manufactures and markets fasteners, and
provides machining serv ices for various industries in the United States.
MW Industries, Inc.
2/12/2016 Opta Minerals Inc. Construction Materials Opta Minerals Inc. manufactures, recycles, and distributes industrial
minerals, silica-free abrasives, and specialty sands and other products
and serv ices in Canada and internationally.
Speyside Equity LLC
PAGE |
REPRESENTATIVE BUILDING PRODUCTS & MATERIALS TRANSACTIONS
20
BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
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Energy, Power& Infrastructure
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Services
Business Services
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Specialty Distribution
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BUILDING PRODUCTS & MATERIALS
INDUSTRY UPDATE │ JULY 2016
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Harris Williams & Co. (www.harriswilliams.com and www.harriswilliams.de) is a preeminent middle market investment bank focused on the advisory needs of clients worldwide. The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides sell-side and acquisition advisory, restructuring advisory, board advisory, private placements, and capital markets advisory services.
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