What Happened?
Shares of building materials distributor GMS (NYSE: GMS) jumped 11.7% in the afternoon session after the company announced it had agreed to be acquired by The Home Depot's subsidiary, SRS Distribution. The all-cash deal values the specialty building products distributor at $110.00 per share, for a total enterprise value of approximately $5.5 billion.
This price represents a significant 36% premium to the stock's closing price on June 18, before acquisition rumors began to circulate.
The move ends a potential bidding war that began when industrial consolidator QXO made an unsolicited offer for GMS. The acquisition will allow SRS Distribution, which Home Depot bought last year, to expand its offerings for professional contractors by adding GMS's portfolio of wallboard, ceilings, and steel framing products. GMS's current leadership team is expected to remain in place to lead the business as part of the larger SRS organization.
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What The Market Is Telling Us
GMS’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. Moves this big are rare for GMS and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 10 days ago when the stock gained 26.2% after Home Depot joined QXO in a bidding war to acquire the company. This came right after QXO made a proposal of $95.20 per share for GMS, valuing it at approximately $5 billion and representing a substantial premium. The competitive acquisition scenario, with two major players vying for GMS, drove investor optimism about a potentially higher final sale price.
Wall Street expressed optimism about the deal, with Truist analysts highlighting Home Depot's potential to pay more than QXO, given its history of "one and done" offers. Overall, this can be considered a positive development for GMS's shareholders, given the improved possibility of exiting their position at a significantly higher price.
GMS is up 29.1% since the beginning of the year, and at $108.80 per share, has set a new 52-week high. Investors who bought $1,000 worth of GMS’s shares 5 years ago would now be looking at an investment worth $4,425.
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