Tech-forward building products startup QXO is taking its $11 billion takeover offer for roofing company Beacon directly to the company’s shareholders, while accusing the company’s board of ignoring shareholder’s best interest.
QXO’s public proposal, which includes a letter to Beacon’s chairman of the board Stuart Randle from CEO Brad Jacobs, follows what QXO says has been Beacon’s “continued refusal to substantially engage with [QXO] on our offer to acquire Beacon.”
QXO submitted its initial offer in November.
“Our all-cash offer provides compelling value. We believe Beacon shareholders have a right to evaluate our proposal, despite the attempt by Beacon’s board of directors to withhold it from them,” says Jacobs.
For its part, Beacon has confirmed that it has “previously received and rejected an unsolicited, non-binding proposal” from QXO. The building products distributor says it thoroughly evaluated the proposal and its board of directors “unanimously rejected the proposal” while determining the offer “significantly” undervalued Beacon and its prospects for growth.
“After carefully review and deliberation, our board unanimously determined that QXO’s proposal significantly undervalues Beacon and fails to reflect the company’s growth strategy and upside potential,” says Randle. “Beacon has a proven track record of delivering superior results and shareholder value, having generated total shareholder returns under our current management team of more than 200% during the past five years.”
Beacon is a distributor of building products, including roofing materials and complementary products, such as siding and waterproofing, with more than 580 branches across all 50 U.S. states and seven provinces in Canada.
QXO’s proposal of $124.25 a share is a 37% premium above Beacon’s 90-day unaffected volume-weighted average price of $91.02.
“We presented a full and compelling price that is very close to the highest end of our value range,” Jacobs writes. “The Beacon board of directors appears to have priorities that do not include capturing a compelling premium and creating significant, immediate value for Beacon shareholders.”
In the letter, Jacobs says he and QXO chief financial officer Ihsan Essaid have made “numerous attempts” to “engage constructively” with Beacon to reach a deal following an initial virtual meeting with CEO Julian Francis in July 2024. He says efforts from QXO have been met with delays, cancellations, and “unreasonable preconditions,” despite the indication given from Beacon that the company had been put up for sale.
Beacon says, contrary to the assertions from QXO, it offered to engage on multiple occasions, including to discuss price, subject only to a standard non-disclosure agreement (NDA). Beacon says it held repeated discussions between its executive team and the executive team of QXO and offered a standard NDA to share confidential projections and relevant company information. The company offered to limit the duration of the customary confidentiality obligations as part of the NDA through Beacon’s planned Investor Day on March, at which point the company will present its 2028 long-term targets.
Jacobs affirms its proposal contains “non financing contingency” and QXO has not relented from its $124.25 per share offer despite a “deteriorating operating environment and capital markets backdrop” and what QXO calls a “failure to optimize value for shareholders” by Beacon.
Randle says Beacon has acted in “good faith” to engage with QXO and show them “a path to value in a timeframe that would preserve their rights and flexibility.”
“However, QXO has refused to improve its first and only proposal, which the board determined significantly undervalues the company,” Randle says. “Our board remains open to all opportunities to maximize shareholder value and is fully committed to acting in the best interests of Beacon and all of its shareholders.”
QXO has approximately $5 billion of cash on hand and has secured the financing commitments sufficient to pay 100% of the purchase consideration, according to Jacobs. Morgan Stanley is acting as financial advisor to QXO and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal counsel.
“We are available to meet at short notice to get a deal done. If that does not happen, we intend to let your shareholders decide whether they want our compelling offer,” Jacobs concludes the letter.
Jacobs founded QXO in 2023 with the intention to create a market leader in building products distribution and the company expects to begin trading on the New York Stock Exchange on Jan. 17. The company identifies the building products distribution industry’s “nascent use” of technology, AI, and B2B e-commerce as a “compelling opportunity” for QXO as a technology-forward operation.
Zonda principal Todd Tomalak notes similarities between the Home Depot’s acquisition of SRS Distribution in 2024 with QXO’s proposal and the underlying importance of roofing in the building products space.
“None of this is just about roofing—it’s all about future overlap with other types of pro-intensive projects,” says Tomalak. “Consider: One year ago, Home Depot targeted their focus on ‘Complex Pro,’ and their SRS acquisition was their license to go after this very different type of customer. QXO bidding on Beacon throws a more complicated wrench in that mix, because of the future overlap with other categories.”
