TopBuild to Acquire Specialty Products & Insulation

TopBuild Corp., a leading installer and specialist distributor of insulation and building material supplies to the construction industry in the United States and Canada, has agreed to buy Specialty Products & Insulation for $960 million in cash.

SPI is an Incline Equity Partners portfolio firm.

SPI achieved pro forma sales of about $703 million and adjusted EBITDA of $77 million for the fiscal year ended March 31, 2023.

Roughly half of SPI’s revenue is recurring and is associated with maintenance and repair activity, while the other half is associated with new construction activity.

TopBuild intends to fund the $960 million deal using a new $550 million Term Loan A and cash on hand.

Based on trailing twelve-month pro forma results as of March 31, 2023, the Company’s net debt to pro forma adjusted EBITDA ratio is estimated to be around 2.0 times.

TopBuild will benefit from a $90 million tax asset as a result of the purchase.

TopBuild’s President and Chief Executive Officer, Robert Buck, stated, “The acquisition of SPI is highly strategic for TopBuild, accelerating Specialty Distribution’s growth and enhancing our leadership position in the very diverse and fragmented insulation industry. SPI has a broad customer base, an experienced and talented operating team, and a fabrication footprint complementary to our current mechanical insulation business. In addition, SPI generates significant recurring revenue from industrial maintenance and repair. When combined with our Specialty Distribution business today, we estimate recurring revenue will account for approximately one third of the segment’s overall revenue stream.”

Compelling Strategic Opportunity with a Clear Path to Financial Value Creation

• Brings together two leading specialty distributors to further promote innovation and deliver best-in-class customer experiences.
• Reinforces position as a leading Specialty Distributor and enables multiple avenues for growth across the three highly fragmented insulation end markets we serve: Residential, Commercial Building, and Commercial/Industrial Mechanical.
• Further differentiates TopBuild’s unique operating model and reduces cyclicality by increasing recurring revenue stream.
• Provides opportunities to drive operational efficiencies throughout the Specialty Distribution segment.
• Enhances financial profile through revenue growth and synergy realization, with expected annual run rate cost synergies between $35 and $40 million within two years following the close of the transaction.

Ray Sears, President and Chief Executive Officer of SPI, stated, “We are very pleased to announce this transaction with TopBuild. This will be a tremendous benefit for our customers as the combined organization will be even better positioned to provide them with innovative and high-quality solutions. Both companies have similar corporate cultures with an emphasis on safety, respect, and a continued drive to improve.”

In conclusion Buck noted, “The identification and integration of acquisitions is a TopBuild core competency, as evidenced by our successful M&A track record and the tremendous value we have created for our stakeholders. We are confident SPI will be another outstanding addition to our Company and we look forward to welcoming the SPI team to TopBuild.”

TopBuild’s Board of Directors has approved the transaction, which is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

SPI, located in Charlotte, NC, was founded in 1982 and is a leading specialized distributor of mechanical insulation solutions for industrial and commercial end-markets.

SPI has 85 branches in the United States and four in Canada.

TopBuild’s financial advisors are Guggenheim Securities, LLC and J.P. Morgan Securities LLC, and its legal counsel is Jones Day.

SPI’s financial advisor is Piper Sandler, and its legal counsel is Kirkland & Ellis LLP.