Forest products company Universal Forest Products, Inc. UFPI recently announced that it has completed the acquisition of St. Louis, MO.-based custom merchandising solutions provider, idX Corp.
As revealed, Universal Forest Products acquired all the outstanding shares of idX Corp’s holding company, idX Holdings, Inc. idX Corp. is an internationally recognized firm in the merchandising solutions market, worth $6 billion. The firm generated sales of roughly $303 million in 2015 and has manufacturing, program management and sales facilities in excess of 20 in various countries including North America, Europe and Asia.
Universal Forest Products paid roughly $64.8 million in cash as well as advanced $92.9 million to idX for retiring its outstanding debts. The transaction value was paid through cash and borrowings under revolving credit facility.
This acquisition will add new product portfolio and new customer base to Universal Forest Products’ existing businesses. Also, the addition of skilled workforce of idX will allow the company to penetrate smoothly in the new end markets.
Universal Forest Products does not expect any significant impact of this acquisition on its 2016 results. It predicts the acquired assets to generate approximately $25−$28 million in earnings before interest, tax, depreciation and amortization and incur roughly $6 million in depreciation and amortization expenses in 2017.
The share price of Universal Forest Products has grown roughly 2.33% since the announcement of the deal completion was made on Sep 16.
We believe Universal Forest Products’ constant endeavor to expand its business through inorganic means will prove beneficial, going forward. Earlier in June, the company had signed a deal to acquire Idaho Western, Inc. and certain assets of Robbins Manufacturing Co. Idaho Western, Inc. is a well-known distributor of products, including lumber, plywood, siding and doors among others, while Robbins Manufacturing Co. is well-known for its preservative-treated wood products. The company believes that acquisition of Idaho Western and certain assets of Robbins Manufacturing Co. will boost its revenue by $100 million annually.
Zacks Rank & Other Stocks to Consider
With a market capitalization of $2 billion, Universal Forest Products currently sports a Zacks Rank #1 (Strong Buy). Other favorably ranked stocks in the industry include Norbord, Inc. OSB, Potlatch Corporation PCH and Louisiana-Pacific Corp. LPX. While Norbord and Potlatch sport the same Zacks Rank as Universal Forest Products, Louisiana-Pacific carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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