GMS Inc. shares soared Friday, as it became the center of an upcoming bidding war in the construction industry between Home Depot and QXO.
The Wall Street Journal had reported in its pre-market report that Home Depot was submitting an acquisition offer for the Georgia-based firm. The share price jumped by 29% to $104.50.
This report came after QXO made a public bid of $5 billion on Wednesday. The offer was $95.20 in cash per share, a premium of 27% over GMS 60-day share average price.
GMS confirmed that it received an unsolicited offer from QXO. GMS operates more than 320 distribution centres and over 100 locations for tool rental and sales.
The company announced in a Thursday statement that its board will “carefully evaluate and review” the offer.
QXO makes a firm offer
Brad Jacobs has stated that QXO intends to aggressively pursue GMS.
GMS’s offer was not subject to any financing conditions. The company, which has recently acquired Beacon Roofing Supply for $11 billion, stated that its acquisition of GMS did not require financing.
Jacobs, in a letter addressed to GMS CEO John Turner urged him to respond by the 24th of June or else the offer will be made directly to GMS shareholders.
Jacobs stated in a press release that “our all-cash offer to purchase GMS provides immediate and sure value to GMS’s shareholders, at a significant premium.”
Jacobs’ roll-up strategy is well known, and he previously convinced Beacon Roofing after increasing his offer.
If GMS hesitates, market watchers believe a similar strategy could be used.
Home Depot’s ambition signals wider sector ambition
Home Depot is reportedly interested in buying GMS, which suggests that the retailer wants to expand its presence on the construction supplies market.
Home Depot, with a capitalization market of $345 billion dollars, has considerable resources in order to compete with QXO whose value is about $13 billion.
Home Depot would gain access to GMS’s existing contractor customers, including both commercial and residential builders.
Consolidation is an important trend as businesses strive to increase their market share, improve efficiency and gain scale through technology and adoption.
Mixed results, but long-term growth still remains
GMS’s latest earnings report, which was released on Wednesday, showed a mixed image.
The adjusted earnings per share for the fourth quarter were $1.29, down from $2.01, but above Wall Street’s expectations of $1.11.
The revenue fell from $1.41 to $1.33, which was above the consensus estimate.
CEO John Turner recognized macroeconomic headwinds such as high interest rates, and market uncertainty but struck an optimist note.
Turner stated that “as we enter fiscal 2026 we are cautiously hopeful we’re nearing the end of the cycle. We believe the pent-up demands will manifest as the macro environment improves.”
Analysts increase price targets amid buzz about takeovers
Analysts are optimistic about the prospect of an industry-wide bidding war.
Raymond James has raised the price target for GMS from $80 to $90, while maintaining its “Outperform” rating.
Investment firm expresses positive views on GMS for those investors who are willing to endure near-term housing challenges. The fundamentals of the company remain solid despite market conditions.
RBC took it a step farther, raising its target from $65 to $95.20 per shares in order to meet QXO’s offer. They also reaffirmed a rating of “sector-perform”.
Truist has also raised the target price for GMS from $80 to $105 and kept a Hold rating.
According to FactSet, the average analyst’s price target is now $93,27. The consensus rating leans towards overweight.
Home Depot’s offer is expected to be made public by Home Depot on June 24th, when GMS will respond to QXO.
The two companies are betting big on trends that will last for a long time, including the housing market, contractor loyalty and modernization of supply chains.
The post GMS Stock Jumps 29% On Takeover Interest From Home Depot, QXO and Analysts Raise PTs could be updated as new developments unfold.
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