Foundation Building Materials to Sell Mechanical Insulation Business to Dunes Point Capital for $122.5 Million

Transaction Highlights

  • Net proceeds  of approximately $116.0 million will be used to pay down debt
  • Enhances long-term profitability
  • Divestment of non-core  asset

TUSTIN, Calif.–(BUSINESS WIRE)– Foundation Building Materials, Inc. (“FBM” or the “Company”) (NYSE:FBM), announced that it has entered into a definitive agreement to sell its Mechanical Insulation segment to an affiliate of Dunes Point Capital, LP, for $122.5 million, subject to customary closing conditions and is expected to close during the fourth quarter of 2018.

The Mechanical Insulation (“MI”) segment distributes and fabricates commercial and industrial insulation products through 67 branch and fabrication locations in the United States and Canada that provide solutions for pipes and mechanical systems to insulation contractors, HVAC contractors, and general contractors and operators of large industrial facilities. In addition, the MI segment provides insulation fabrication services that customize products to fit specific systems for commercial and industrial customers.

“The divestiture of the Mechanical Insulation segment will sharpen FBM’s focus on growing our more profitable businesses while driving superior service and productivity for our customers,” said Ruben Mendoza, President, and Chief Executive Officer. “Today’s announcement advances our strategy of reducing debt, improving profitability, and optimizing FBM’s portfolio and positions FBM to enhance shareholder value.”

Use of Proceeds

Net proceeds of approximately $116.0 million from the transaction will be used to pay down the Company’s ABL credit facility. In addition to the anticipated reduction of the ABL credit facility, FBM recently completed the refinancing of its long-term debt and expects $12 million to $15 million of annual cash interest expense savings beginning in the fourth quarter of 2018. With the completion of these two transactions, the Company believes it will have ample liquidity to pursue its growth initiatives while continuing its focus of reducing debt.

2018 Outlook

Upon closing of the transaction, the Company will operate under one segment, Specialty Building Products. For 2018, the Company expects full year 2018 Specialty Building Product segment net sales to be in the range of $1.98 billion to $2.06 billion, which includes net sales contributions from acquisitions to date.

About Foundation Building Materials

Foundation Building Materials is a specialty distributor of wallboard, suspended ceiling systems and mechanical insulation throughout North America. Based in Tustin, California, the Company employs more than 3,700 employees and operates more than 220 branches across the U.S. and Canada.

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