Major investor on verge of majority stake.
CD&R Investment Associates picked up 3.2 million shares of Beacon Roofing Supply Inc. (BECN). The firm, already a major holder, increased their stake by 30 percent by making the buy. The total cost came out to just over $102 million, and leaves the fund with 13.7 million shares of the company.
In the past year, CD&R has picked up over 28 million shares, and corporate insiders have also been net buyers, with only two small sales.
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Beacon Roofing distributes residential and commercial roofing materials through various suppliers, and also provides complimentary building products. The company has a network of 550 branches in all 50 states. Shares are down 8 percent in the past year, and sales have been flat.
Action to take: This company is a good way to play trends in the housing market. The latest data there suggests a bit of a pickup following a significant slowdown earlier in the year, and at current valuation the company trades around 11 times earnings.
Investors should consider buying shares at or under $35, and speculators should look to the April 2020 $35 calls as a way to profit from the rise in shares. With CD&R now owning nearly half of the company’s shares outstanding, some kind of buyout offer may be on the table in the coming months.