Home improvement retail giant Lowe's has announced its acquisition of Foundation Building Materials Inc. for $8.8 billion, marking the company's largest acquisition in history. The transaction will be financed through a combination of short-term and long-term debt, including a $9 billion bridge loan commitment.
Foundation Building Materials Inc. operates more than 370 locations across the United States and Canada, serving approximately 40,000 professional customers with products including drywall, insulation materials, metal framing, ceiling systems, commercial doors, hardware, and complementary building materials. In 2024, the company achieved $6.5 billion in revenue with adjusted EBITDA of $635 million.
The transaction, expected to close in the fourth quarter, is anticipated to contribute to Lowe's profit growth in the first fiscal year following completion. From a balance sheet perspective, Lowe's expects its leverage ratio to rise to 3.4-3.5 times upon transaction completion. The company plans to suspend share repurchases and aims to reduce the leverage ratio to 2.75 times by the end of the second quarter of 2027.
Wall Street has responded positively to the announcement. JPMorgan analyst Christopher Horvers noted that the urgency for mergers and acquisitions in the professional distribution market is significantly escalating. As companies intensify competition to expand their addressable market size and build differentiated business capabilities, this will become a focal area.
Jefferies analyst Jonathan Matuszewski believes Lowe's strategy to accelerate expansion into the large and complex professional market will prove successful: "Through the acquisitions of ADG and Foundation Building Materials Inc., Lowe's has built a leading interior solutions platform in the attractive new construction and renovation sectors." He pointed out that Lowe's will now be able to provide professional customers in the new construction and renovation industries with faster fulfillment services, more comprehensive product lines, enhanced digital tools, and a robust trade credit platform.
Beyond potential cost synergies, the new business will also bring significant cross-selling opportunities. Looking ahead, Lowe's may continue to pursue bolt-on acquisitions.
UBS analyst Michael Lasser commented: "In the short term, this move will provide Lowe's with faster fulfillment capabilities, strengthened professional digital tools, trade credit programs, and substantial cross-selling opportunities; in the long term, it will help the company delve deeper into the larger professional segments within the home improvement market."
Seeking Alpha analyst Luca Socci emphasized that professional customers generate higher sales volumes and transaction values while exhibiting repeat purchase characteristics, making this an ideal expansion direction for Lowe's.