GMS Completes the Acquisition of Kamco Supply Corporation

Rhea-AI Summary

GMS Inc. (NYSE: GMS) successfully completes the acquisition of Kamco Supply Corporation, a leading construction products supplier in the New York City area. The acquisition is expected to boost revenue and expand GMS's geographic footprint, providing growth opportunities and cost synergies.

Positive

• Successful completion of the acquisition of Kamco Supply Corporation.
• Kamco generated approximately $235 million in annual revenue in 2023.
• Expectation of top-line growth from Kamco's Bronx location.
• Anticipated cost and revenue synergies over the next three years.
• Funding of the acquisition through cash on hand and available borrowings.

Negative

• None.

Insights

Market Research Analyst

The acquisition of Kamco Supply Corporation by GMS Inc. represents a strategic move to penetrate the New York City construction market, which is known for its robust demand and high barriers to entry. The reported $235 million in annual revenue generated by Kamco underscores the significant scale of this acquisition, which could considerably enhance GMS's market share in its core product categories.

From a market research perspective, the integration of Kamco's distribution facilities and the Bronx greenfield into GMS's network is poised to bolster the company's distribution efficiency and customer reach. The New York City market is highly competitive and the ability to provide a comprehensive product suite and outstanding customer service is crucial for success. Hence, this acquisition is not just a quantitative addition but also a qualitative leap forward for GMS.

Financial Analyst

The financial implications of the acquisition are noteworthy, with GMS funding the $321.5 million purchase price through cash and available borrowings. This financing strategy suggests a confident investment by GMS in its growth, albeit it may affect the company's leverage ratios in the short term. Investors and analysts will closely monitor the impact on GMS's balance sheet, particularly the debt-to-equity ratio and interest coverage metrics.

Anticipated cost and revenue synergies over the next three years could lead to improved margins and profitability for GMS. The emphasis on SG&A savings, cross-selling opportunities and complementary product additions indicates a comprehensive approach to realizing these synergies. Investors should consider the execution risk associated with these integration efforts and the potential for these synergies to drive shareholder value.

Construction Industry Expert

The acquisition of Kamco by GMS is a clear indicator of consolidation trends within the specialty building products distribution sector. By acquiring a supplier with an established presence in the New York City metropolitan area, GMS is effectively eliminating a competitor while gaining a strategic foothold in a lucrative market. The mention of the Bronx greenfield site is particularly significant, signaling GMS's commitment to urban growth and sustainable development.

This move also reflects the broader industry's focus on vertical integration and geographic expansion to achieve economies of scale. The construction industry often experiences cyclical demand and a presence in a stable market like New York City could provide a buffer during downturns. The integration of Kamco's offerings with GMS's existing portfolio may also enhance the company's ability to cater to a diverse customer base, from small contractors to large construction firms.

TUCKER, Ga.--(BUSINESS WIRE)-- GMS Inc. (NYSE: GMS), a leading North American specialty building products distributor, today announced the successful completion of its previously disclosed acquisition of Kamco Supply Corporation (“Kamco”), a leading supplier of ceilings, wallboard, steel, lumber and other complementary construction products in the New York City metropolitan area.

“As we highlighted during our fiscal third quarter 2024 earnings report, we are pleased to complete this meaningful expansion into the New York City market and to welcome the Kamco team to GMS,” said John C. Turner, Jr., President and Chief Executive Officer of GMS. “Aligned with the values of GMS, the Kamco team of respected professionals has a long tradition of providing outstanding customer service while offering a robust suite of products. Bringing Kamco into the GMS family of brands expands our share in our core products and provides geographic expansion in the highly-attractive New York City market, advancing two of our key strategic priorities.”

For the twelve months ended December 31, 2023, Kamco generated approximately $235 million in annual revenue from its four established distribution facilities and its recently opened Bronx greenfield. GMS believes this Bronx location will meaningfully add to Kamco’s top-line growth as its operations mature. Expanded wallboard distribution and geographic footprint expansion present compelling opportunities for the combined company to better capitalize on available growth in the market and provide an even higher level of service to customers. In addition, progressively over the next three years and going forward, GMS expects this transaction to generate both cost and revenue synergies through the integration of its distribution network and purchasing programs, cross-selling opportunities, complementary product additions to Kamco’s offerings and SG&A savings. GMS funded the $321.5 million purchase price with cash on hand and available borrowings on its revolving credit facility.

About GMS

Founded in 1971, GMS operates a network of over 300 distribution centers with extensive product offerings of Wallboard, Ceilings, Steel Framing and Complementary Products. In addition, GMS operates more than 100 tool sales, rental and service centers, providing a comprehensive selection of building products and solutions for its residential and commercial contractor customer base across the United States and Canada. The Company’s unique operating model combines the benefits of a national platform and strategy with a local go-to-market focus, enabling GMS to generate significant economies of scale while maintaining high levels of customer service.

For more information about GMS, please visit www.gms.com.

Forward-Looking Statements and Information

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by our use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "seek," or "should," or the negative thereof or other variations thereon or comparable terminology. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. The following important factors could cause the future results, to differ: the company’s growth strategy, changes in economic or industry conditions, competition, inflation and deflation, input costs, timing and integration of acquisitions, timing and implementation of price increases for the Company’s products, consumer markets, and other factors identified our filings with the SEC. We undertake no obligation to update any of the forward-looking statements made herein, whether as a result of new information, future events, changes in expectation or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240304473533/en/

Carey Phelps

Vice President, Investor Relations

Phone: 770-723-3369

Email: ir@gms.com

Source: GMS Inc.

FAQ

What is the ticker symbol for GMS Inc.?

The ticker symbol for GMS Inc. is GMS.

What was Kamco's annual revenue in 2023?

Kamco generated approximately $235 million in annual revenue in 2023.

How was the acquisition of Kamco funded?

The acquisition of Kamco was funded with cash on hand and available borrowings on GMS's revolving credit facility.

What are the expected synergies from the acquisition?

GMS expects cost and revenue synergies through integration of distribution network, cross-selling opportunities, and complementary product additions.

What strategic priorities does the acquisition of Kamco align with?

The acquisition of Kamco aligns with GMS's strategic priorities of expanding geographic footprint and core product share.