Lowe's Companies, Inc. (LOW.US) throws 8.8 billion US dollars to acquire building materials company FBM! Wall Street is optimistic about the potential for cross-selling.

US home improvement retail giant Lowe's Companies, Inc. (LOW.US) announced its acquisition of Foundation Building Materials (FBM) for $8.8 billion, setting a record for the largest acquisition in company history. The transaction will be completed through a combination of short-term and long-term debt financing, including a $9 billion bridge loan commitment. FBM operates over 370 locations in the US and Canada, providing products such as drywall, insulation materials, metal framing, ceiling systems, commercial doors, hardware, and other building materials to approximately 40,000 professional customers. In 2024, the company generated revenues of $6.5 billion and adjusted EBITDA of $635 million. The deal, expected to be completed in the fourth quarter, is anticipated to contribute to profit growth for Lowe's Companies, Inc. in the first fiscal year following the transaction. On the balance sheet front, Lowe's Companies, Inc. expects its leverage ratio to increase to 3.4-3.5 times upon completion of the transaction and plans to pause stock buybacks, aiming to reduce the leverage ratio to 2.75 times by the end of the second quarter of 2027. Wall Street has reacted positively to this news: JPMorgan analyst Christopher Horvers points out that the urgency of mergers in the professional distribution market is significantly increasing. As competition intensifies for expanding potential market size and building differentiated business capabilities, this will become a focus area. Jefferies Financial Group Inc. analyst Jonathan Matuszewski believes that Lowe's Companies, Inc.'s strategy to accelerate the expansion in the vast and complex professional market will be effective: "Through the acquisitions of ADG and FBM, Lowe's Companies, Inc. has established a leading interior solutions platform in the attractive new construction and renovation field." He notes that Lowe's Companies, Inc. will be able to provide faster fulfillment services, a broader product portfolio, upgraded digital tools, and a robust trade credit platform to professional customers in the new construction and remodeling industry. In addition to potential cost synergies, the new business will bring significant cross-selling opportunities. Looking ahead, Lowe's Companies, Inc. may continue to advance in reinforcement-type acquisitions. UBS Group AG analyst Michael Lasser evaluates that "in the short term, this move will provide Lowe's Companies, Inc. with faster fulfillment capabilities, strengthened professional digital tools, trade credit programs, and considerable cross-selling opportunities; in the long term, it will help the company further explore larger-scale professional segments in the home improvement market." Seeking Alpha analyst Luca Socci emphasizes that professional customers can bring higher sales and average order values, and have repeat purchase characteristics, which is the ideal direction for Lowe's Companies, Inc. to expand.