Al Root

Beacon Roofing Supply and QXO have agreed to an $11 billion buyout, sending shares of both companies higher.

QXO announced the merger on Thursday morning. It will pay $124.35 per share in cash for the building-materials supplier.

Beacon stock was up 1.9% at $123.80 in premarket trading, while S&P 500 and Dow Jones Industrial Average futures were down 0.4% and 0.3%, respectively. Shares of QXO were up 9.6% at $14.30.

Premarket prices are 55 cents, or 0.4% below the offer price. Investors still need to get paid to wait for the deal to close. The tight spread, however, shows that investors don't expect anything to upend the deal.

Beacon stock moved up about $10 a share in recent days after the pair disclosed merger talks.

"Acquiring Beacon is a key milestone in our plan to create substantial shareholder value and establish QXO as a leader in the $800 billion building-products-distribution industry," said QXO founder and CEO Brad Jacobs in a news release. "We will be applying our proven playbook to a platform ripe to deliver above-market organic growth and significant margin expansion."

Jacobs has built several businesses through mergers and acquisitions. He formed QXO in December 2023 to create a leader in building-products distribution. Jacobs' goal is to reach $50 billion in annual sales through M&A.

QXO has had Beacon in its crosshairs for a while. In February, Beacon's board rejected QXO's unsolicited cash offer for $124.25 per share.

The agreed-upon deal values Beacon at about $11 billion, or 11 times estimated 2025 earnings before interest, taxes, depreciation, and amortization, or Ebitda.

That isn't a steep multiple to pay. Industrial companies in the S&P 500 trade for closer to 15 times estimated 2025 Ebitda, according to FactSet.

Beacon is expected to grow Ebitda at about 5% a year on average for the coming three years and bottom-line earnings at closer to 8%. That's not too bad, relative to the S&P 500 stocks, but Beacon shares trade for closer to 15 times estimated 2025 earnings, while stocks in the index fetch about 21 times on average.

Write to Al Root at allen.root@dowjones.com

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March 20, 2025 08:14 ET (12:14 GMT)

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