TopBuild Corp., an installer and specialist distributor of insulation and building material supplies to the construction industry in the United States and Canada, has agreed to buy Specialty Products & Insulation (“SPI”) for $960 million in cash. SPI is an Incline Equity Partners portfolio firm.
“The acquisition of SPI is highly strategic for TopBuild, accelerating Specialty Distribution’s growth and enhancing our leadership position in the very diverse and fragmented insulation industry,” said Robert Buck, president and chief executive officer of TopBuild. SPI has a large client base, a skilled and experienced management team, and a fabrication footprint that complements our current mechanical insulation company. Furthermore, SPI produces substantial recurring revenue from industrial maintenance and repair. We believe that recurring revenue will account for approximately one-third of the segment’s overall revenue stream when combined with our Specialty Distribution business today.”
TopBuild’s board of directors has approved the transaction, which is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
SPI achieved pro forma sales of about $703 million and adjusted EBITDA of $77 million for the fiscal year ended March 31, 2023. Roughly half of SPI’s revenue is recurring and is associated with maintenance and repair activity, while the other half is associated with new construction activity. TopBuild intends to fund the $960 million deal using a new $550 million Term Loan A and cash on hand. Based on March 31, 2023 pro forma results, the company’s net debt to pro forma adjusted EBITDA ratio is estimated to be around 2.0 times. TopBuild will benefit from a $90 million tax asset as a result of the purchase.
“We are very pleased to announce this transaction with TopBuild,” said Ray Sears, president and chief executive officer of SPI. This will be a huge benefit to our clients because the merged firm will be even better positioned to supply innovative and high-quality solutions. Both firms have comparable corporate cultures, with an emphasis on safety, respect, and continuous improvement.”
