Expected to be over 30% accretive to earnings
per share on a pro forma basis
LANGLEY, BC, Aug. 3, 2021 /CNW/ - Hardwoods Distribution
Inc. ("HDI" or the "Company") (TSX: HDI) today
announced the completion of its previously announced acquisition
(the "Acquisition") of the equity interests in Novo Building
Products Holdings, LLC ("Novo"). The Acquisition
was completed for a purchase price of U.S.$302 million and had an effective closing date of
July 30, 2021.
"This is a transformative acquisition for the Company," said
Rob Brown, President and Chief
Executive Officer of HDI. "Novo significantly broadens our
addressable market, providing turnkey access into the home center
and home builder distribution customer segments. We believe the
combined scale and sophistication of HDI and Novo creates a
national platform to provide additional solutions to our customers,
and allows us to capitalize on the market share opportunity
available. The multi-year outlook for our products and the
end markets we participate in is very attractive, with strong
demand driving new residential, repair and remodel and commercial
building expenditures. Millennials represent the largest
demographic segment of the population and are now entering peak
home buying years, complemented by historically low interest rates
and rising home equity levels that support spending. We see
significant growth opportunities ahead as we continue to build HDI
as a world class distributor of architectural building products for
the benefit of our customers, vendor partners, employees and
shareholders."
In connection with the closing of the Acquisition, HDI closed on
a new credit facility with its existing lender Bank of America,
N.A. (the "Lender"). This senior secured facility was
increased to U.S.$600 million (the
"New Credit Facility") from the previously announced
U.S.$525 million given strong demand
from the syndicate of underwriters. The New Credit Facility was
used to refinance the outstanding debt of certain of the Company's
subsidiaries and fund the purchase price for Novo. The New Credit
Facility consists of (i) a revolving credit facility of
US$225 million which can be drawn
upon in U.S. dollars and Canadian dollars, and (ii) a term loan of
US$375 million. The New Credit
Facility bears interest at a rate equal to LIBOR plus up to 2.25%
or the base rate of interest charged by the Lender from time to
time plus 1.0%. The LIBOR and Base Rate margins for the New Credit
Facility are subject to performance pricing adjustments, from time
to time, based on the Company's then applicable leverage ratio.
About HDI
HDI is one of North America's
largest distributors of architectural grade building and millwork
products to the residential, repair and remodel, and commercial
construction industries. The Company currently operates a network
in North America of 84
distribution facilities.
Forward-Looking Statements
Certain statements in this news release may constitute
"forward-looking information" or "financial outlook" within the
meaning of applicable securities laws that involve known and
unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements or industry results to
be materially different from any future results, performance or
achievements or industry results expressed or implied by such
forward-looking information and financial outlook. Forward-looking
information and financial outlook are identified by the use of
terms and phrases such as "anticipate", "believe", "could",
"estimate", "expect", "intend", "may", "plan", "predict",
"project", "will", "would", and similar terms and phrases,
including references to assumptions. Such information may involve,
but is not limited to, comments with respect to strategies,
expectations, planned operations or future actions. Forward-looking
information in this news release includes, without limitation,
statements with respect to our belief that the combined scale and
sophistication of HDI and Novo creates a national platform to
provide additional solutions to our customers, and allows us to
capitalize on the market share opportunity available; that the
multi-year outlook for our products and the end markets we
participate in is very attractive, with strong demand driving new
residential, repair and remodel and commercial building
expenditures; millennials represent the largest demographic segment
of the population and are now entering peak home buying years,
complemented by historically low interest rates and rising home
equity levels that support spending; we see significant growth
opportunities ahead as we continue to build HDI as a world class
distributor of architectural building products for the benefit of
our customers, vendor partners, employees and shareholders. Actual
events or results may differ materially.
The forecasts and projections that make up the
forward-looking information and financial outlook in this news
release are based on assumptions which include, but are not limited
to: the Company realizing the expected benefits and synergies of
the Acquisition; no undisclosed liabilities associated with the
Acquisition; no material adverse changes occur in respect of the
acquired assets subsequent to completion of the Acquisition; the
Company can comply with the restrictive conditions required by the
New Credit Facility; the financial impact of the Acquisition is as
currently expected by management; the Company and Novo do not lose
any key personnel; there are no decreases in the supply of, demand
for, or market values of products that harm the Company or Novo's
business; the Company does not incur material losses related to
credit provided to its customers; the Company is able to sustain
its level of sales and earnings margins; the Company is able to
grow its business long term and to manage its growth; the Company
is able to integrate acquired businesses, including Novo; there is
no new competition in the markets in which the Company operates
that lead to reduced sales and profitability; the Company can
comply with existing regulations and will not become subject to
more stringent regulations; no material product liability claims;
importation of products manufactured with hardwood lumber or sheet
goods does not increase and replace products manufactured in
North America; the Company's
management information systems upon which it is dependent are not
impaired; the Company is not adversely impacted by disruptive
technologies; an outbreak or escalation of a contagious disease
does not adversely affect the Company's business; and, the
Company's insurance is sufficient to cover losses that may occur as
a result of its operations.
The forward-looking information and financial outlook in this
news release is subject to risks, uncertainties and other factors
that could cause actual results to differ materially from
historical results or results anticipated by the forward-looking
information. The factors which could cause results to differ from
current expectations include, but are not limited to: the actual
impacts of the Acquisition on the Company's
earnings per share, free cash flow and Leverage
Ratio may not be in line with management's
expectations; the Company may not be able
to reduce its leverage levels by the amount or at the time desired,
or at all; the Acquisition may not be immediately accretive to
earnings per share; potential undisclosed liabilities associated
with the Acquisition; the New Credit Facility will be subject to
certain restrictive conditions that limit the discretion of
management; exchange rate fluctuations between the Canadian and US
dollar could affect the Company's performance; the Company's
results are dependent upon the general state of the economy; the
Company depends on key personnel, the loss of which could harm its
business; decreases in the supply of, demand for, or market values
of hardwood lumber or sheet goods could harm the Company's
business; the Company may incur losses related to credit provided
to the Company's customers; the Company's products may be subject
to negative trade outcomes; the Company may not be able to sustain
its current level of sales or earnings margins; the Company may be
unable to grow its business long term or to manage any growth; the
Company may be unable to integrate acquired businesses; competition
in the Company's markets may lead to reduced sales and
profitability; the Company may fail to comply with existing
regulations or become subject to more stringent regulations;
product liability claims could affect the Company's sales,
profitability and reputation; importation of products manufactured
with hardwood lumber or sheet goods may increase, and replace
products manufactured in North
America; disruptive technologies could lead to reduced
revenues or a change in our business model; the Company is
dependent upon its management information systems; the Company's
insurance may be insufficient to cover losses that may occur as a
result of the Company's operations; an outbreak or escalation of a
contagious disease may adversely affect the Company's business;
and, the Company's credit facilities affect its liquidity, contain
restrictions on the Company's ability to borrow funds, and impose
restrictions on distributions that can be made by certain
subsidiaries of the Company. More information about the risks and
uncertainties affecting HDI's business can be found in the "Risk
Factors" section of its Annual Information Form dated March 11, 2021 which is available under the HDI's
profile on SEDAR at www.sedar.com.
To the extent any forward-looking information or statements
in this news release constitute a "financial outlook" within the
meaning of securities laws, such information is being provided to
demonstrate the potential benefits of the Acquisition and
management's estimate of the future financial performance of Novo,
and readers are cautioned that this information may not be
appropriate for any other purpose and that they should not place
undue reliance on such information.
Although HDI has attempted to identify factors that would
cause actual actions, events or results to differ materially from
those disclosed in the forward-looking statements or information or
financial outlook in this news release, there may be other factors
that cause actions, events or results not to be as anticipated,
estimated or intended. Also, many of the factors are beyond the
control of HDI. Accordingly, readers should not place undue
reliance on forward-looking statements or information in this news
release. The forward-looking information is made as of the date of
this news release, and HDI assumes no obligation to publicly update
or revise such forward-looking information to reflect new
information, subsequent or otherwise, except as may be required by
applicable securities law. The forward-looking information
contained herein is expressly qualified in its entirety by this
cautionary statement.
SOURCE Hardwoods Distribution Inc.
