CEOs overuse the word "transformative" when discussing their company's latest moves, but Paul Isabella wasn't exaggerating when he used it to describe Beacon Roofing Supply's $2.6 billion acquisition of Allied Building Products.
Not only is Beacon adding more than $2 billion in annual revenue – almost half of what it reported for fiscal year 2017 – but by bringing Allied into its portfolio, the company will bolster its existing product category and expand into another.
"This acquisition is truly transformative for Beacon, both for our existing exterior products and our entrance into the interior products category," Isabella told analysts on this week's quarterly earnings call.
The acquisition, announced in August and set to close Jan. 2, could help Beacon climb another spot on MDM's Top 10 Building Material & Construction Distributors. From 2013-16, Beacon ranked fourth on MDM's list of the top distributors in this sector. The company jumped to No. 3 in the most recent rankings following a handful of acquisitions in 2016 and, most notably, its $1.1 billion purchase of Roofing Supply Group in 2015.
This deal surpasses the RSG purchase. Allied Building Products for a few years was the third-largest building materials & construction distributor before dropping to fifth in this year's rankings as other companies merged and bumped it down the list.
Beacon is enjoying tailwinds as hurricane recovery kicks in. With repairs to the damage caused by Harvey and Irma now underway, Beacon and other building materials & construction distributors are poised to benefit as roof replacement for both residential and commercial structures becomes a top priority. The momentum began in Beacon's fiscal fourth quarter, when sales grew 9.8 percent to $1.3 billion.
"We believe this favorable sales trend we saw in the quarter is a testament for the consistency of re-roofing which makes up approximately 80 percent of demand in the attractive economic drivers we are seeing in our business," Isabella said. "The combination of these factors has continued to really strong previously deferred, pent-up re-roofing demand in our residential business."