QXO appeals to Beacon's shareholders

QXO's key points are distilled below: 

1. QXO’s Offer to Acquire Beacon Roofing Supply is Highly Compelling and at a Significant Premium to Beacon’s Unaffected Share Price

In evaluating QXO’s offer, Beacon conveniently ignores that its share price reflects our acquisition interest following the Wall Street Journal’s November 18, 2024 report. That day, Beacon’s stock rose 9.9%, compared to a 0.4% increase in the S&P 500. Yet, Beacon compares QXO’s offer to share price metrics as of January 14, 2025—a misleading approach that distorts expectations of Beacon’s standalone value.

A more appropriate analysis shows that QXO’s offer represents:

• A 37% premium to Beacon’s 90-day unaffected VWAP of $91.02 per share as of November 15, 2024;
• A 26% premium to Beacon’s unaffected spot price of $98.75 per share as of November 15, 2024; and
• A higher price than Beacon’s stock has ever traded.

2. Data Indicates that Beacon Will Miss its Margin Targets. The Board’s Claim of Strong Performance is Flawed ‍

From 2019 through LTM September 2024, Beacon’s 7.7% revenue CAGR is the lowest of its peer group and well below the peer median of 12.1%.

... Consensus analysts’ estimates indicate that Beacon will:

• Miss its 2025 Gross Margin target by 130 basis points;
• Miss its 2025 EBITDA Margin target by 114 basis points; and
• Deliver EBITDA margins 20bps lower in 2025 than when the “Ambition 2025” plan was introduced.

Furthermore, Beacon’s claims of superior stock performance are easily debunked. Over the past five years, Beacon’s total shareholder return has trailed its Building Products Proxy Peers by 86% and trailed those peers by 140% since CEO Julian Francis took over as CEO in August 2019. ‍

3. QXO’s Offer Represents a 3.0x Premium to Beacon’s Historical Multiple

Since Beacon has not closed the valuation multiple gap despite implementing “Ambition 2025,” reporting supposedly strong results and stock markets nearing all-time highs, we urge shareholders to decide if the current management and Board are the right team to create value for shareholders. QXO’s proposal provides a 3.0x premium to Beacon’s average historical next-twelve-months EBITDA multiple, providing substantial immediate cash-certain value to shareholders.

4. If Beacon is Truly Confident in its Future, it Should Release its Projections Today

Further, these newly constructed projections will not be revealed for another month—more than three months after Beacon’s Board first rejected QXO‘s offer. Why the delay? What is Beacon formulating in the interim? If the company had strong, credible projections, there would be no reason for such a drawn-out disclosure process.

5. Beacon Insiders Recently Sold Shares at Prices Far Below QXO’s Offer

Since early 2024, Beacon’s Chairman and CEO have sold a significant percentage of their shares at prices well below QXO’s $124.25 per share offer:

• Chairman Stuart Randle sold 20.9% of his shares at $94.80.
• CEO Julian Francis sold 9.8% of his shares at $97.91.
• CD&R exited its position in Beacon at $83.16 per share.

If Beacon’s future is so bright under current management, why are insiders selling shares sharply below QXO’s offer price?

6. Beacon’s Own Filings Suggest that No Actionable Competing Offer Exists

Beacon’s recent filings indicate no viable third-party alternative to QXO’s premium offer. Beacon’s 14D-9 filing has not disclosed any competing offers, or even a single NDA being signed.

QXO’s offer is clear, compelling and in shareholders’ best interest. It is time for Beacon’s Board to stop obstructing shareholders and let them decide their own financial future.

What are analysts saying?

According to a Feb. 10 analysis released by Truist Securities, Beacon will likely not budge. At least for now. The report shares: "BECN has already rejected QXO’s offer, and we doubt anything will change before the February 24th deadline," as well as, "We suspect BECN’s rejection of the deal will not be changed, and the process will come down to a vote for directors at the annual meeting."

However, Truist's analysts do believe QXO will ultimately win this battle. 

As the report elaborates: "With the offer at a price level BECN stock has never traded at, we suspect that a majority of investors will vote for QXO Board nominees (and thus the current deal) if the process goes that far. The only exception is if another bidder comes in with a superior cash option. While still possible, the search for another bidder has been ongoing for sometime and their still does not seem to be another serious contender so far. While emergence of another bid is still possible, the chance are starting to dwindle, in our view."

Beacon, meanwhile, shared a statement with HBSDealer:

"On multiple occasions, we have sought to constructively engage with QXO, to allow them to review our 2028 long-term targets and show them a path to increased value. Instead, they have refused to engage, first stating that they were not interested in receiving any confidential information and later disparaging information they have not seen. We look forward to sharing more about our future growth plans and 2028 long-term targets with all investors at our upcoming Investor Day."