What analysts are saying about Lowe's largest acquisition ever

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Lowe's (NYSE:LOW [https://seekingalpha.com/symbol/LOW]) announced the largest acquisition in the company's history with a deal to snap up Foundation Building Materials for $8.8 billion. The deal will be funded with a mix of short- and long-term debt, including $9 billion in committed bridge financing.

Foundation Building Materials operates more than 370 locations across the United States and Canada, serving about 40,000 professional customers with products including drywall, insulation, metal framing, ceiling systems, commercial doors, hardware, and complementary building materials. The company generated $6.5 billion in revenue and $635 million in adjusted EBITDA in 2024,

The deal is expected to be accretive to Lowe's (NYSE:LOW [https://seekingalpha.com/symbol/LOW]) profits in the first fiscal year after closing sometime in Q4.

On the balance sheet, Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) expected leverage rate is 3.4X to 3.5X at time of closing. The company aims to de-lever to 2.75X by the end of Q2 of 2027 while pausing share repurchases.

On Wall Street, J.P. Morgan analyst Christopher Horvers highlighted that the urgency of acquisition in the pro distributor market is clearly escalating, which the firm thinks will be a focus as competition heats up even more to expand the total addressable market and build capabilities in a very different business.

Jefferies Jonathan Matuszewski thinks Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) efforts to accelerate its push to better serve the customers in the huge Complex Pro market will pay off. "With ADG and FBM, Lowe's has a leading interior solutions platform in the attractive new construction and R&R verticals," he noted.

Matuszewski said Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) will now be able to offer Complex Pro customers in the new construction and repair & remodeling industry faster fulfillment, expanded product assortment, improved digital tools, and a robust trade credit platform. In addition to potential cost synergies, significant cross-selling opportunities are seen as likely through the new business. Looking ahead, the expectation is that Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) could fire off some additional bolt-on M&A.

UBS also issued positive remarks about the deal. "In the near term, this move should equip LOW with faster fulfillment, enhanced pro digital tools, a trade credit program, and a meaningful cross-selling opportunity," wrote analyst Michael Lasser. "In the longer term, this should allow LOW to tap into the larger pro segment of the home improvement market," he added.

On Seeking Alpha, analyst Luca Socci [https://seekingalpha.com/article/4815252-lowes-how-to-read-a-macro-story-disguised-as-an-earnings-report] said the deal is precisely where Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) wants to expand because Pro customers drive higher sales and higher ticket sizes. Socci also reminded investors that they represent recurring customers.

Shares of Lowe's Companies (LOW [https://seekingalpha.com/symbol/LOW]) rose 0.9% in afternoon trading on Wednesday.

The Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) development has implications for Home Depot (HD [https://seekingalpha.com/symbol/HD]) as the two rivals go head to head in the Pro market. ETFs with the largest weighting in Lowe's (LOW [https://seekingalpha.com/symbol/LOW]) are the iShares U.S. Consumer Focused ETF (IEDI [https://seekingalpha.com/symbol/IEDI]), the VanEck Retail ETF (RTH [https://seekingalpha.com/symbol/RTH]), and the iShares U.S. Home Construction ETF (ITB [https://seekingalpha.com/symbol/ITB]).

MORE ON LOWE'S

* Lowe's: How To Read A Macro Story Disguised As An Earnings Report [https://seekingalpha.com/article/4815252-lowes-how-to-read-a-macro-story-disguised-as-an-earnings-report]
* Lowe's Stock: Dividend Doesn't Lie [https://seekingalpha.com/article/4805364-lowes-stock-dividend-doesnt-lie]
* Lowe's: Execution On Pro Strategy Key To Re-Rating [https://seekingalpha.com/article/4802577-lowes-execution-on-pro-strategy-key-to-re-rating]
* Lowe's rallies after boosting guidance, unveiling a major acquisition [https://seekingalpha.com/news/4487319-lowes-rallies-after-boosting-guidance-unveiling-a-major-acquisition]
* Lowe's to acquire Foundation Building Materials for $8.8B [https://seekingalpha.com/news/4487312-lowes-to-acquire-foundation-building-materials-for-88b]