Why TopBuild Stock Soared More Than 19% Higher Today
Key Points
The buyer is a peer company looking to bulk up substantially.
This acqusition could make it quite a player in its niche.
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TopBuild (NYSE: BLD) has been sold in a big-ticket deal, and on that news, investors eagerly piled into the building products company on Monday. By the time the dust cleared, TopBuild's stock had risen in excess of 19% in the opening trading session of the week.
A $17 billion wakeup call
On Sunday, TopBuild and fellow building products specialist QXO (NYSE: QXO) announced they had signed a definitive agreement on the acquisition. Under its terms, QXO is to purchase TopBuild in a roughly $17 billion buyout. According to the two companies, the deal values TopBuild at $505 per share, a nearly 20% premium to the stock's 60-day weighted average price.
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Image source: Getty Images.
TopBuild investors will have the option to receive their payment in cash or 20.2 shares of QXO common stock for each TopBuild share they hold.
The deal is part of QXO's strategy to expand its presence in the construction products segment. The companies quoted TopBuild CEO Robert Buck as saying that the acquisition will "combine our leadership in insulation installation and specialty distribution with QXO's scale, technology, and procurement capabilities."
The boards of directors of both companies unanimously approved the transaction, which is expected to close in this year's calendar third quarter. It is now subject to approval by the shareholders of QXO and TopBuild.
Vaulting ambitions
As with most acquisitions priced at a double-digit premium, the QXO/TopBuild deal probably won't meet much resistance from investors in the latter company.
So, assuming it goes smoothly from QXO's end, it's likely to be completed in the near future. And that's the rub -- existing investors and those who jumped in quickly enough on the news will benefit, but that play is over now. Regardless, it now makes the fattening QXO a growing force to watch in its niche.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends QXO and TopBuild. The Motley Fool has a disclosure policy.
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