With two weeks left until its tender offer is set to expire, QXO is appealing to Beacon shareholders with an attempt to set the record straight on the latter’s valuation.
QXO — the building materials distribution and technology platform launched in 2024 by Brad Jacobs — posted a letter on Feb. 10 addressing Beacon shareholders about what it says are misrepresentations in Beacon’s SC 14D9/A filing with the SEC.
That Feb. 6 filing was a solicitation/recommendation statement in which Beacon detailed that its board of directors unanimously rejected QXO’s all-cash tender offer of $124.25 per share to buy the company, reiterating its publicly-shared stance that QXO “significantly undervalues our company and future prospects for growth and value creation”.
Beacon urged its shareholders to likewise reject QXO’s offer and not tender their shares.
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QXO: Beacon’s Evaluation Uses Inflated Metrics
QXO says Beacon’s evaluation of the outstanding offer “conveniently ignores” that its share price reflects QXO’s acquisition interest following the Wall Street Journal’s initial Nov. 18 report about it. On that day, Beacon’s stock jumped 9.9%. QXO noted that Beacon compares the offer to share price metrics as of Jan. 14, which it said is a misleading approach that distorts expectations of Beacon’s value.
Essentially, QXO is saying that the WSJ report artificially inflated Beacon’s valuation, which Beacon is leveraging in its messaging to shareholders.
As it has multiple times since the standoff between both sides began, QXO’s letter voiced that “a more appropriate analysis” shows that its offer represents a 37% premium to Beacon’s 90-day unaffected volume-weighted average price price as of Nov. 15 — the day before the WSJ report posted; a 26% premium to Beacon’s unaffected spot price as of Nov. 15; and a higher price than Beacon has ever traded.
QXO’s letter said Beacon is likely to miss its financial targets in its “Ambition 2025” plan and that Beacon’s board touts “cherry-picked” historical performance that paints a misleading picture of its track record.
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QXO noted that Beacon announced its March 13 investor day days after QXO disclosed its plan to appeal directly to shareholders, and suggested Beacon should release its 2028 financial targets now rather than wait until the investor day if it is “truly confident in its future” rather than wait another month — which would be three months after Beacon’s board first rejected the offer.
“Why the delay? What is Beacon formulating in the interim? If the company had strong, credible projections, there would be no reason for such a drawn-out disclosure process,” QXO’s letter said.
The letter goes on to note that since the start of 2024, Beacon Chairman Stuart Randle and Francis have sold a significant percentage of their shares at prices well below that of QXO’s offer.
Further, the letter said that Beacon’s recent filings suggest there is no viable third-party alternative offer to QXO’s.
QXO’s offer is set to expire at midnight at the end of Feb. 24.
Beacon: Set for March 13 Investor Day
In its Feb. 6 filing, Beacon included a brief company-wide message issued from CEO Julian Francis.
“We are doing something special together at Beacon by providing superior service to our customers as well as building tremendous value for our shareholders We have delivered outstanding results and are continuing to execute well on our Ambition 2025 plan,” the message noted. “I look forward to sharing more on our long-term financial targets and future growth plans at our upcoming Investor Day on March 13.
“The most important thing we can continue doing as a team is remaining on track, serving our customers, executing with excellence and staying true to our values.”
So, Where is This All Headed?
On Feb. 10, an equities research report from financial services firm Truist that the situation is likely to come down to a vote for directors at Beacon’s annual shareholder meeting. Last year, its 2024 meeting was on May 15, 2024 — announced in early April.
Ultimately, Truist favors QXO winning the standoff.
“It seems unlikely to us that investors will vote against the cash offer regardless ofwhat information is given at the upcoming BECN analyst day,” the report noted.
Truist said it’s possible QXO could increase its bid, but that seems unlikely, as is the prospect of an alternative “white knight” bidder.
“While emergence of another bid is still possible, the chance are starting to dwindle, in our view.”
Meanwhile, Beacon has housed information for its shareholders and the public to view regarding the situation at beaconbuildsvalue.com, which includes quotes from other analyst notes suggesting that QXO needs an improved offer to acquire Beacon. As of Feb. 10, the most recent of these quotes was from Jan. 28.
See MDM’s Investment Bank Directory for a rundown of the key investment banks and advisory firms in the distribution sector.
Background
On Jan. 27, QXO filed its own SEC brief in which it provided an extensive timeline of negotiation attempts and updates with Beacon, along with its stance on actions Beacon’s board had taken, noting “unreasonable predictions” and QXO engagement attempts that had been met with delays and cancellations.
A day later, Beacon announced that its board unanimously adopted a limited duration shareholder rights agreement to protect stockholder interests that went into effect immediately. QXO called the move a “poison pill” and “shareholder unfriendly” aimed at blocking QXO’s bid.
Beacon will report its fourth quarter and full year 2024 financial results on Feb. 27.
