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Dive Brief:
In a bid to deepen its offering for pro customers, Lowe’s has agreed to acquire Foundation Building Materials for about $8.8 billion, the company announced Wednesday. The deal is expected to close in the fourth quarter, subject to customary closing conditions.
FBM is a North American distributor of interior building products like ceiling systems, metal framing, drywall, insulation, commercial doors and hardware.
Lowe’s will fund the acquisition through short-term and long-term debt and expects to maintain its current credit ratings. The home improvement retailer secured $9 billion in fully committed bridge financing from Bank of America and Goldman Sachs.
Dive Insight:
The acquisition of FBM is intended to accelerate Lowe’s Total Home Strategy by strengthening its position among pro customers.
Following the acquisition, FBM President and CEO Ruben Mendoza, as well as the company’s senior leadership team, will continue leading FBM.
The announcement comes about two months after Lowe’s closed on its acquisition of Artisan Design Group, a provider of design, distribution and installation services for interior finishes.
“With this acquisition, we are advancing our multi-year transformation of the Pro offering,” Lowe’s CEO Marvin Ellison said in a statement regarding FBM. “It allows us to serve the large Pro planned spend within a $250 billion total addressable market and aligns perfectly with our Total Home strategy. FBM’s scalable, multi-trade distribution platform and strong leadership combined with our recent acquisition of ADG will significantly enhance our Pro offering.”
Both Lowe’s and its larger rival The Home Depot have been working to court pro customers to help stoke sales amid a volatile time for the sector. Lowe’s earlier this year made updates to its loyalty program to make it easier for small- and mid-sized professional contractors to earn rewards on purchases. The retailer also introduced digital tools to its website and mobile app for pros, including reordering frequently purchased products and tracking orders.
Meanwhile Home Depot last year acquired building product supplier SRS Distribution, which serves roofing, landscaping and pool contractors. And in June, the retailer announced plans to acquire specialty building products distributor GMS Inc, via SRS.
Lowe’s announcement came as the North Carolina-based home improvement retailer reported second quarter total sales increased 1.6% year over year to $24 billion, while comparable sales grew 1.1%. Both operating income and net income inched up 0.6%, reaching $3.5 billion and $2.4 billion, respectively.
The retailer updated its full-year guidance, projecting total sales between $84.5 billion and $85.5 billion, up from prior guidance of $83.5 billion to $84.5 billion. Comp sales are expected to be flat to up 1%, while operating margin is projected to be between 12.1% and 12.2%. Capital expenditures are expected to be about $2.5 billion.