Lowe's buying Foundation Building Materials for about $8.8B

Lowe’s is buying Foundation Building Materials, a distributor of drywall, insulation and other products, for approximately $8.8 billion as the home improvement retailer intensifies its focus on professional builders

Lowe's is buying Foundation Building Materials, a distributor of drywall, insulation and other products, for approximately $8.8 billion as the home improvement retailer intensifies its focus on professional builders.

FBM also provides metal framing, ceiling systems, commercial doors and hardware and other products that serve large residential and commercial professionals in both new construction and repair and remodel applications. It has more than 370 locations in the United States and Canada serving 40,000 professional customers.

The acquisition is part of Lowe's move to provide more options for professional builders. The Mooresville, North Carolina-based company recently closed on its $1.3 billion acquisition of Artisan Design Group, a provider of design, distribution and installation services for interior surface finishes, including flooring, cabinets and countertops, to home builders and property managers.

Rival Home Depot has been making similar moves. In June the home improvement retailer announced that it was buying specialty building products distributor GMS for $4.3 billion.

GMS Inc. of Tucker, Georgia, is a distributor of specialty building products like drywall, steel framing and other supplies used in both residential and commercial projects.

Home Depot's acquisition of GMS came after it purchased SRS Distribution, a materials provider for professionals, last year for more than $18 billion including debt. SRS provides materials for professionals like roofers, landscapers and pool contractors.

Neil Saunders, managing director of GlobalData, said that the professional builder market provides a growth opportunity to both Home Depot and Lowe's as there's a lot of spending in the segment.

“Pro is basically the new battleground for home improvement,” he said. “Naturally, with two big giants in the arena, there are likely to be some bruising battles ahead. However, at this stage, we believe the market is big enough and fragmented enough to allow both players to extract some wins.”

Lowe's deal for FBM is expected to close in the fourth quarter.

Aside from the acquisition, Lowe's reported its fiscal second-quarter financial results on Wednesday. The company posted an adjusted profit of $4.33 per share, which topped the $4.23 per share that analysts polled by Zacks Investment Research expected.

Revenue totaled $23.96 billion in the period, which met Wall Street's expectations.

Lowe's raised its full-year sales outlook to a range of $84.5 billion to $85.5 billion. It previous predicted sales would be between $83.5 billion and $84.5 billion for the year.

The company's stock rose more than 3% before the market open.