Canada’s Doman Expands in U.S. After Buying Texas Lumber Firm
Canada’s Doman Expands in U.S. After Buying Texas Lumber Firm
(Bloomberg) -- Canada’s Doman Building Materials Group Ltd. bought Hixson Lumber Sales for $375 million to expand its U.S. operations as strong homebuilding across North America fuels demand for wood.
The all-cash purchase of the Dallas-based lumber company will triple Doman’s U.S. sales and immediately add to earnings and cash flow, the Vancouver-based company said Friday in a statement. Hixson, a family-owned firm, is the leading wholesaler and manufacturer of lumber and treated lumber operating in central U.S., with 19 plants, five sawmills, a fleet of trucks and 1,100 employees, said the company previously known as CanWel.
Chief Executive Officer Amar Doman said the deal is “a great complement to our existing U.S. operations while further advancing our growth strategy and developing a leadership position in the central corridor of the U.S., in areas such as Texas that continue to have extremely strong growth activity.”
Doman shares rose 6.5% to C$8.68 at 12:16 p.m. in Toronto trading, the biggest jump in about six weeks.
Doman, previously named CanWel Building Materials Group, made the acquisition in the midst of a yearlong North American building boom that’s driven up prices of lumber and wood materials. Lumber producers have been posting record profits thanks to tight lumber supplies and heightened demand for wood materials through the pandemic as homebound workers undertake renovations and housing construction surges.
U.S. lumber futures for July delivery traded around $1,284.30 per 1,000 board feet on Friday, down 26% from the May 10 peak. Lumber prices for immediate delivery are also retreating, according to CIBC analyst Hamir Patel based on data from Random Lengths trade journal.
The Hixson acquisition will make Doman one of the largest pressure-treated lumber producers in North America, with about 2 billion board feet of annual capacity, according to the company. The deal expands its U.S. presence from the West Coast and Hawaii to states in the middle of the country, where the company operates treating plants.
Doman said the transaction is expected to be more than 55% accretive to earnings and cash flow on a per-share basis.
Stifel GMP advised Doman on the takeover, which was funded by cash on hand and revolving credit facilities. Doman changed its name on May 31 from CanWel Building Materials Group Ltd.
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