M&A News: Home Depot and QXO Battle for GMS in Construction Supremacy Bid
American home improvement retailer Home Depot (HD) has initiated a bidding war with smaller rival QXO Inc. (QXO) to strengthen its market position and capture greater contract revenue. According to a Wall Street Journal report, Home Depot made an undisclosed takeover offer for GMS Inc. (GMS) yesterday, following an unsolicited bid from QXO on Wednesday.
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Home Depot and QXO aim to secure a larger share of the construction supplies and tools market by becoming bigger and more technologically advanced players capable of winning larger contracts. GMS distributes building products and tool supplies, including wallboard, ceilings, steel framing, and complementary construction products to residential and commercial contractors across North America. It operates around 320 distribution centers and 100 tool sales, rental, and service centers.
QXO Makes a Compelling Bid for GMS
QXO offered to buy all of GMS' outstanding shares for $95.20 per share in cash, valuing the company at about $5 billion. This offer represents a 27% premium over GMS' 60-day volume-weighted average price. The news pushed shares of both companies higher on June 18, with QXO surging 11.7% and GMS closing up 10.6%.
QXO has given GMS' board until June 24 to review and respond to the offer. CEO Brad Jacobs has warned that if the company fails to respond, he will take the offer directly to GMS' shareholders. Jacobs is 'confident' that shareholders will find the offer attractive.
Interestingly, both GMS and QXO have built their businesses by acquiring smaller companies in the sector over the years. GMS' board has stated that it is reviewing the offer in consultation with its independent legal and financial advisors, acting in the best interests of the company and its shareholders.
In the meantime, GMS reported better-than-expected results for Q4FY25 on June 18. Adjusted earnings per share came in at $1.29, beating the consensus of $1.11, while revenues of $1.33 billion also surpassed estimates of $1.3 billion. Despite the downturn in the construction market amid interest rate challenges and overall uncertainty, GMS delivered a solid quarterly performance. Considering its resilient results, it appears that QXO and Home Depot are betting on the right horse for now.
Is Home Depot Stock a Good Buy Now?
On TipRanks, HD stock has a Strong Buy consensus rating based on 19 Buys and five Hold ratings. Also, the average Home Depot price target of $428.77 implies 23.6% upside potential from current levels. Year-to-date, HD stock has lost 9.7%.
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