QXO's bold bid for Rexel rejected
According to a Reuters report, QXO's bid for Rexel, a France-based distributor of electrical components, has been rebuffed.
The massive $9.4 billion offer is not likely to be revised or revisited, per Reuters, though QXO remains on the hunt for a splashy acquisition in the building materials sector.
In a press release, Rexel writes:
Rexel confirms it has received earlier this week an unsolicited, non-binding preliminary proposal from QXO regarding a potential acquisition of Rexel at an indicative price of €28.00 to €28.40 per share.
Rexel’s Board of Directors has reviewed the proposal in detail and has unanimously decided not to pursue it, considering that it significantly undervalues the company and does not reflect its value creation potential through its Power Up 25 strategic plan. The Board of Directors remains highly confident in Rexel’s management to deliver the mid-term objectives presented in during the June 2024 Capital Markets Day. Indeed, Rexel’s management team has successfully demonstrated over the last few years its ability to increase the company’s underlying profitability and enhance its growth profile in an accelerating electrification world.
Despite the setback, QXO remains flush with cash and in search of M&A targets. In a note to investors, analysts from Truist share the following observations regarding QXO's state of play:
- We doubt that QXO will make an increased offer and most likely will move on to other targets.
- The process does show significant price discipline on the part of QXO, and we applaud identifying a target with margins that are well below distribution peers. It also shows a willingness to bid on large players, and we suspect this will become the norm.
- We ... suspect that QXO will move on to other acquisition opportunities, of which there are many.
- The relative size of the company approached was much larger than we expected from QXO based on our prior calculations. This could mean that many other larger potential targets could be in play than we originally thought.
- Considering the M&A discipline of QXO’s founder Brad Jacobs, and the importance of QXO’s initial acquisition into the broader building products distribution industry, where electrical products distribution is just one of a dozen verticals QXO is contemplating pursuing, we do not perceive a QXO/Rexel combination.
- We infer QXO continues to be in active discussions with roughly a dozen other initial M&A targets across the broader building products distribution market, which is estimated to represent $800 billion of annual revenue across North America and Europe combined.
