Before markets opened on Monday, QXO, Inc. intensified the pressure on Beacon Building Supply by taking out a full-page ad in The Wall Street Journal today — speaking directly to shareholders — and setting a deadline to acquire all outstanding company shares at a "notable premium" by Feb. 24.
The all-cash offer, valued at $124.25 per share, places Beacon's valuation at approximately $7.7 billion, or around $11 billion, including debt, was first made public in a letter sent to Beacon's Chairman, Stuart A. Randle, after Beacon's board rebuffed previous private overtures; Beacon deemed the proposal undervaluing the company.
In a follow-up news release on Jan. 27, QXO reiterated its offer and its “37% premium over a specific 90-day “unaffected volume-weighted average price” of $91.02 per share" to sway shareholders of the immediate value that the QXO acquisition would realize. Beacon, which trades on the Nasdaq under the symbol BECN, opened Monday just south of $120.
Roofing Contractor magazine reviewed the viability of the QXO offer based on analyses from BMO Capital Markets, RBC Capital Markets, and Stifel. All three banks believe the bid price falls short of Beacon’s accurate valuation. Our analysis focused on the banks’ consensus target price and the offer’s implications.
Consensus Target Share Price for BECN
The three analyses provided to RC and other outlets earlier this month reveal a range of target prices for BECN that exceed the $124.25 offer, suggesting significant upside potential for shareholders. These target prices include:
BMO Capital Markets
The firm increased its target price to $136, citing improved operational performance, reduced financial leverage, and a simplified capital structure. This valuation is based on 11x 2025 EBITDA, which the firm believes is justified given Beacon’s growth trajectory and industry trends.
“With improved financial performance, significantly lower leverage, and a simplified capital structure, we think BECN should trade well above its historical trading multiple of ~10x EBITDA,” Kenatn Mamtora, an analyst with BMO Capital Markets, wrote in the report.
RBC Capital Markets
An analysis by Mike Dahl, the lead author, set a target price of $130 based on a 10x EV/EBITDA multiple for 2025 earnings. RBC highlights that while QXO’s offer provides substantial relative value as a starting point, Beacon could achieve a higher valuation through standalone growth or further negotiations.
Additionally, the authors stated that after having spoken with several investors, several key points were raised, including:
- Most view QXO’s bid as a fair starting point, leading to confusion over hostile exchanges;
- Conversations suggest a deal might occur slightly above the current offer, especially if BECN lacks alternative offers, although investors recognize QXO’s price discipline;
- Questions about potential other bidders arose, with our assessment showing limited interest despite the company being for sale;
- BECN must provide strong guidance for 2025 and 2028 to convince shareholders of greater near-term value.
“[W]e see the $124.25/share offer price as having strong relative value as a starting point, though we do believe there is likely potential wiggle room to the upside toward ~$130 (which remains our price target),” Dahl and his colleagues wrote.
“A drawn-out proxy battle likely doesn’t serve either QXO or BECN well, and now, with both sides out in public with their versions of the facts, there could be more pressure for both to constructively engage,” the report continued.
Stifel
Drafted by W. Andrew Carter, a research analyst at Stifel, the evaluation adjusted Beacon’s target price to $131. Carter wrote that there is a 20% probability of a standalone valuation at $115 and an 80% probability of a takeout offer closer to $135.
“We believe QXO’s formal offer of $124.25 catalyzed the acquisition potential,” the report says. “For QXO to be successful via a proxy context, we believe a higher offer is necessary given management’s track record with the plan presented at the upcoming investor day a key watch-point.”
The analysis said Stifle believes the real upside could be unlocked from a “strategic acquirer,” citing Lowe’s by name, and highlighting strategic synergies that could drive higher valuations.
Key Considerations
Point of Agreement
All analysts agree that Beacon’s intrinsic value exceeds $124.25 per share, with target prices clustering around $130–$136. Beacon’s operational improvements, strategic positioning in the roofing supply market, and potential as an anchor asset for strategic acquirers justify a higher valuation.
Disagreements
The valuation multiples range from 10x to 11x EBITDA, with Stifel considering acquisition probabilities and RBC focusing on relative value. QXO’s $124.25 per share offer is a significant premium but below consensus target prices.
Relative Valuation
The offer aligns with BECN’s historical EV/EBITDA multiple of about 10x but overlooks recent operational improvements and industry changes. For example, Home Depot’s 2024 acquisition of SRS Distribution was at a 14x EBITDA multiple, highlighting the potential for a higher valuation.
Strategic Implications
QXO's consolidation efforts in the building products industry position BECN as a key asset. However, Beacon views the offer as undervaluing its potential, with goals of an 11% EBITDA margin by 2028 and significant growth in private-label and digital sales to improve shareholder returns.
Risks of Acceptance
Undervaluation: Accepting the offer could leave long-term value on the table, especially if Beacon achieves its strategic targets.
Limited Synergies: Unlike a strategic buyer, QXO may face challenges in unlocking synergies beyond financial engineering.
Potential Rewards
Immediate Liquidity: The all-cash offer provides immediate value for shareholders, mitigating risks associated with market volatility or the execution of long-term plans.
Proxy Contest Risk: QXO has indicated its willingness to nominate directors, potentially leading to a drawn-out battle that could distract management and weigh on performance
Strategic Considerations for Both Parties
For Beacon:
Standalone Viability: Under CEO Julian Francis, Beacon’s leadership has demonstrated operational resilience and growth. Its Project 2025 plan focuses on digital and greenfield investments, positioning the company for sustainable growth.
Investor Sentiment: While some investors view the $124.25 offer as a fair starting point, many expect Beacon to extract a higher valuation or demonstrate compelling standalone value at its upcoming investor day.
For QXO:
Raising the Offer: To secure shareholder approval, QXO may need to increase its bid closer to $135 per share, aligning with analyst consensus and strategic valuations.
Competitive Bidding: The potential for competing offers from strategic buyers like Lowe’s increases the pressure on QXO to act decisively.
Should Beacon Accept?
While QXO’s offer presents a strong premium, analysts generally agree that Beacon’s fair value is in the $130–$136 range. Accepting the offer now would undervalue the company’s growth potential and strategic importance in the building products industry. Unless QXO significantly raises its bid, Beacon would likely create more long-term shareholder value by following its standalone strategy or considering competitive offers.
Chris Gray contributed to this report.