Toronto-based Superior Plus Corp. has announced that it has entered into a definitive agreement to sell its construction products distribution business for US$325 million (approximately Cdn. $420 million) to Foundation Building Materials, LLC.
The sale is subject to customary purchase price adjustments, closing conditions and the receipt of required regulatory approvals and is expected to close in the second half of 2016, a news release reports.
The company says the sale will allow it to reduce debt, increase its financial flexibility and enable Superior to redeploy capital to its energy distribution and specialty chemicals businesses. The divestiture of CPD simplifies Superior’s business model by exiting its most cyclical business.
The construction products business focuses on commercial and industrial insulatoin and specialty walls and ceilings products. Superior’s website says:
It is the largest distributor of specialty construction products to the walls and ceilings industry of Canada. Through its operating divisions, Winroc and Specialty Products and Insulation (SPI), Superior CPD has 100 distribution centres, including 17 fabrication facilities, across North America with a presence in 28 states and five provinces. Winroc and SPI have business track records dating to the early 1970s and roots reaching back as far as the 1920s.
The sale of CPD follows a strategic review process which commenced in early 2014. This review was subsequently terminated as management did not believe that prospective acquirers were offering a value reflective of CPD’s core business, attractive free cash flow and sizeable growth opportunities.
Following the termination of the initial strategic review process, Superior made significant efforts to increase the standalone value of CPD. These efforts included the implementation of a new management team, the initiation of various growth initiatives and the execution of other transformational initiatives including the replacement of two legacy ERP systems with a single, integrated system.
“We are extremely pleased with the execution of this agreement with Foundation Building Materials,” said Superior president and CEO Luc Desjardins. “This transaction is transformative for our balance sheet and is the foundation for Evolution 2020 where we will focus on our energy distribution and specialty chemicals businesses.”
