Doman Building Materials Group Ltd. (“
Doman” or
the “
Company”) (TSX:DBM; DBM.NT) is pleased to
announce that it has acquired Texas-based Hixson Lumber Sales. The
Company acquired all of the assets of the Hixson Lumber Sales group
of companies (“
Hixson”) for approximately US$375
million in cash, including inventory1, (the
"
Transaction"). Hixson is being acquired on a
cash-free and debt-free basis, and the Transaction is being funded
from the Company’s existing cash on hand and revolving credit
facilities.
Hixson is a leading wholesale and manufacturing
company of lumber and treated lumber operating in the Central
United States. Its operations are highly complementary to the
Company’s existing U.S. West Coast operations without overlap. The
Transaction will facilitate the Company’s growth, will be
immediately accretive and will expand the Company’s product suite
to include new offerings.
“We are very excited with the addition of Hixson
to the Doman group of companies. The Transaction is a great
complement to our existing U.S. operations while further advancing
our growth strategy and developing a leadership position in the
central corridor of the U.S., in areas such as Texas that continue
to have extremely strong growth activity,” said Amar Doman,
Chairman and CEO. “We continue our disciplined approach in tracking
and executing on accretive growth opportunities, further
strengthening our financial performance, and enhancing shareholder
value based on a fundamentally sound and sustainable growth plan.
With the Transaction, our US footprint now extends from the West
Coast and Hawaii across the mainland and into several high growth
states in the middle of the US, we proudly operate 32 treating
plants across our system, and our product offerings importantly
include Southern Yellow Pine building materials.”
About Hixson
Founded in 1959 and headquartered in Dallas,
Texas, Hixson is a value-added wholesale and manufacturing company
in the lumber and treated lumber space, operating from 19 locations
located in eight U.S. states. Hixson operates 19 lumber treating
plants, five specialty sawmills and its own trucking fleet, and
services and delivers products in approximately 25 states primarily
in the central United States.
With approximately 1,100 employees, Hixson
serves national big box retailers, several national home builder
distribution yards, large regional lumber yards, and multiple small
independent lumber yards. Primary business lines include pressure
treated lumber, wood fence manufacturing, and specialty items for
new home and renovation markets.
The Transaction will combine Hixson’s operations
with Doman's well-established and growing North American platform,
which includes the California Cascade and Honsador groups of
companies.
Transaction Highlights
- Diversified and
Complementary Operations. The Transaction facilitates the
Company’s ongoing United States expansion by entering the important
central U.S. region - a large, robust and active market. The
Company immediately obtains a market leadership position in this
region with a diversified and loyal customer base from its
locations in Texas, Arkansas, Illinois, Indiana, Missouri,
Mississippi, Louisiana and Tennessee.
- Continued Wood Treatment
Expansion. Doman is now one of the largest
pressure-treated lumber producers in North America with
approximately 2 billion board feet of annual capacity, adding to
the Company’s existing base of pressure-treated plants and
distribution centers.
- Financially
Attractive. The acquisition of Hixson effectively triples
the Company’s sales in the United States, and the purchase price is
consistent with the Company’s traditional targeted multiples range
for acquisitions. The Transaction is expected to be immediately
accretive to the Company’s annual earnings and free cash flow per
share and is expected to lead to further expansion of EBITDA
margins.In assessing the financial merits of the Transaction,
management felt it was prudent to assess the Hixson transaction
with a long term perspective in mind, despite exceptionally strong
performance and record results for both companies in 2020 that
continued through the first quarter of 2021. Thus, management felt
it was vitally important to view Hixson’s financial performance on
the basis of an appropriate discount to recent outperformance
across the industry, which has arisen from market supply and
pricing dynamics in the North American building materials space.
This led our team and our financial advisors to arrive at a more
normalized picture of Hixson’s performance. On this normalized
basis, the Transaction is expected to be accretive by over 55% on
both earnings per share and free cash flow per share.
- Synergy Potential.
The Company expects to realize synergies from integrating Hixson’s
business with the Company’s existing customer base and suite of
products. Opportunities for additional operational and margin
synergies are expected to be realized over time, including scale
and purchasing benefits on pressure-treated inputs, and utilization
of the Company's established purchasing, sales and distribution
channels and access to the Company’s infrastructure and
resources.
- Skilled Operational
Leadership Team. Hixson is an exceptionally-run,
family-owned business that has a strong legacy in its key markets
and strong relationships with its customer and suppliers. Hixson
has a committed and strong management team that operates very
efficiently on its platform across the central United States. Key
management have 50+ years of combined industry experience and will
remain in place, further adding to the Company’s bench
strength.
- Increase in Senior Secured
Revolving Credit Facility. The Company is also pleased to
announce that it has amended its existing senior credit facility
with Wells Fargo Capital Finance, increasing the revolving credit
limit to $500 million, effective concurrent with the closing of the
Transaction.
The Transaction was completed on June 4, 2021
and is not subject to any further regulatory or shareholder
approvals or consents.
Advisors and Counsel
Stifel GMP acted as financial advisor to Doman
and a team including Dorsey & Whitney LLP, Goodmans LLP and
Bernard LLP acted as its legal advisors.
About Doman Building Materials Group
Ltd.
Doman is headquartered in Vancouver, British
Columbia and trades on the Toronto Stock Exchange under the symbol
DBM and is a leading North American distributor of building
materials, and is Canada's only fully integrated national
distributor in the building materials and related products sector.
Doman operates several distinct divisions: CanWel Building
Materials with multiple treating plant, planing facilities and
distribution centres coast-to coast in all major cities and
strategic locations across Canada; founded in 1959, Hixson Lumber
Company in the central United States, with 19 treating plants and
five sawmills located in eight states, headquartered in Dallas,
Texas, distributing, producing and treating lumber, fencing and
building materials; California Cascade in the western United States
near Portland, Oregon, San Francisco and Los Angeles, California
with treating facilities and distribution of building materials,
lumber and renovation products; founded in 1935, the Honsador
Building Products Group in 14 locations in the State of Hawaii,
with treating facilities, truss plants and distribution of a wide
range of building materials, lumber, renovation and electrical
products. In addition, through its CanWel Fibre division, the
Company operates a vertically integrated forest products company
based in Western Canada, operating from British Columbia to
Saskatchewan, also servicing the US Pacific Northwest. CanWel Fibre
owns approximately 117,000 acres of private timberlands, strategic
licenses and tenures, log harvesting and trucking operations,
several post and pole peeling facilities and two pressure-treated
specialty wood production plants and a specialty saw mill. Please
also see our prior filings on SEDAR under CanWel Building Materials
Group Ltd. for additional information.
For further information regarding Doman please
contact:
Ali MahdaviInvestor Relations416-962-3300
ali.mahdavi@canwel.com
Certain statements in this press release may
constitute "forward-looking" statements including statements
regarding the Transaction and the anticipated benefits of the
Transaction (including synergies, EBITDA expansion and earnings and
cash flow accretion). The following statements are or may
constitute forward-looking statements (1) statements proceeded by,
followed by, or that included words like "may", "will", "would",
"should", "expect", "believe", "plan", "intend", "anticipate",
"predict", "remain", "anticipate", "estimate", "potential",
"continue", "plan", "could", "might", "project", "targeting",
"future" and other similar terminology, and (2) other statements
regarding matters that are not historical facts. The matters
addressed in these statements are subject to a number of risks,
uncertainties and assumptions that may cause actual results to
differ materially from those projected, including, but not limited
to: the risk that the existing and acquired businesses will not be
integrated successfully; the risk that cost savings, synergies and
enhanced financial performance expected to result from the
Transaction may not be fully realized or may take longer to realize
than expected; disruption from the Transaction making it more
difficult to maintain relationships with customers, employees or
suppliers; the effect of general economic conditions, including
market demand for Doman’s or Hixson’s products, and prices for such
products; the availability, cost and other terms of capital; the
efficiency and consequences of operations improvement initiatives;
the effect of forestry, land use, environmental and other
governmental regulations; and the risk of losses from fires, floods
and other natural disasters. These and other factors, including the
risk factors set out in Doman’s annual information dated March 12,
2021, could cause or contribute to actual results differing
materially from those contemplated by forward-looking statements.
Accordingly, readers should not place undue reliance on any
forward-looking statements or information. Forward-looking
statements contained in this press release speak only as of the
date of this press release. Doman does not undertake, and
specifically disclaims, any obligation to update or revise any
forward looking statements or information, whether as a result of
new information, future developments or otherwise, except as
required by applicable law. Statements in this press release
relating to the amount of the anticipated earnings and free cash
flow accretion from the Transaction are based on Hixson’s actual
results for the year ended December 31, 2020 after giving effect to
certain conservative adjustments intended to reflect a more
normalized representation of its financial performance given the
impact of recent market supply dynamics in the North American
building materials industry on 2020 results.
1 The estimated inventory value is subject to post-closing
adjustment, per the terms of the Acquisition Agreement.
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