TopBuild shares jump after $17 billion QXO deal

Shares of U.S. building products distributor and installer TopBuild ​jumped nearly 20% in premarket trading on ​Monday, a day after the company ‌agreed ​to be acquired by construction supplies distributor QXO in a $17 billion dealamid industry-wide consolidation. Unanimously approved by both boards, the acquisition will make QXO ‌the second-largest publicly traded building products distributor in North America, with more than $18 billion in combined annual revenue. QXO shares were flat in premarket trading.

* Dealmaking in the U.S. building products industry is on the uptick ‌as companies seek to scale and solidify local supply chains to mitigate lingering tariff risks ‌amid stable demand for new construction projects, repairs and renovations. * Under the deal, TopBuild's shareholders can elect to receive $505 in cash or 20.2 shares of QXO common stock for each TopBuild share, on the condition that the total transaction comprises about ⁠45% in ​cash and 55% in ⁠QXO shares.

* The $505 cash consideration represents a premium of 23.1% over TopBuild's last close of $410.31 on Friday, Reuters calculations showed. * TopBuild shares ⁠were last trading at $481.39.

* However, some analysts are questioning the timing of the agreement. "Consolidation across building products ​distribution has been accelerating, but we're surprised TopBuild decided to sell now," Jefferies analysts said. * "We do ⁠not believe TopBuild was actively exploring a sale, and while the mid-teens multiple is solid, it doesn't strike us as an ⁠offer ​they couldn’t pass up."

* D.A. Davidson analysts said while it was unsurprising for QXO to remain active in the mergers and acquisitions (M&A) space, they did not view TopBuild as a "high-probability ⁠target" given the large size of the deal. * QXO, a newcomer to the building products sector led ⁠by billionaire dealmaker Brad ⁠Jacobs, has been actively pursuing M&As.

* Meanwhile, analysts at Jefferies and Truist Securities said they did not expect other potential bidders for TopBuild considering the size ‌of QXO's ‌offer.