MW QXO touts AI advantage in bid to win over Beacon Roofing's shareholders

By Steve Gelsi

QXO takes $11 billion offer to buy Beacon Roofing directly to stock owners by touting its tech savviness and demand for homes

QXO Inc. on Monday changed tactics in its $11 billion effort to buy Beacon Roofing Supply Inc. by appealing directly to shareholders about its ability to use AI in the low-tech building-products space, as well as the huge market opportunity posed by the housing shortage in the U.S.

Beacon Roofing Supply's stock (BECN) rose 1.3% in premarket trading on Monday. The stock has risen 41.5% in the past year.

With rebuilding from the southern California wildfires feeding additional need for homes, the American housing shortage will provide an upward push to the sector that supplies the raw materials for construction.

QXO Inc. (QXO) isn't exactly a household name to shareholders, but its executives have worked on building up several other big, publicly traded companies such as shipping specialist XPO Inc. $(XPO)$ as well as GXO Logistics Inc. (GXO), freight broker RXO Inc. $(RXO)$ and United Rentals Inc. $(URI)$.

QXO is now setting its sights on consolidating the building-products business, claiming it is more tech-savvy than others in the space, as the first company in the sector to name a chief AI officer.

Earlier this month, Beacon rejected a so-called "bear hug" proposal from QXO to buy the company for $124.35 a share, after QXO initially approached the company in July.

The company said the offer "significantly undervalues Beacon and fails to reflect the company's growth strategy and upside potential."

On Monday, QXO took its merger proposal directly to shareholders in the form of a tender offer.

Beacon said in a statement it received the latest offer and said it would study it. The company urged shareholders not to take any action at this time, but also pointed out that the offer of $124.25 a share has already been rejected by management as too low.

MarketWatch has reached out to QXO for comment.

In a filing on Monday, QXO laid out its argument on why shareholders should approve its offer as part of its plan to become a "tech-forward leader in the $800 billion building products distribution industry" with $50 billion in revenue in the next 10 years.

"QXO's combination of scale and innovation should elevate the customer experience, increase sales force effectiveness and enable margin expansion," the company said.

QXO said it offers expertise in "price optimization, demand forecasting, warehouse automation and robotics, automated inventory management, route optimization for delivery fleets, supply chain visibility, and end-to-end digital customer connectivity."

Currently, the building-products industry has about 7,000 distributors in North America and 13,000 in Europe, with annual growth of about 7% a year over the past five years

The industry has generated compound annual revenue growth of 7% over the last five years and continues to benefit from "powerful" growth drivers, QXO said, citing industry data.

The U.S. housing supply is 3 million units short of demand, the company said, plus America's public transportation, utility and communication systems need repair or replacement.

Beacon Roofing Supply traces its roots to 1928 as a distributor of roofing materials, siding and waterproofing through 580 branches in the U.S. and Canada.

-Steve Gelsi

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January 27, 2025 08:37 ET (13:37 GMT)

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