424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-249376

 

LOGO

  

LOGO

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

Dear Stockholders:

On behalf of the boards of directors of Builders FirstSource, Inc., which is referred to as Builders FirstSource or BFS, and BMC Stock Holdings, Inc., which is referred to as BMC, we are pleased to enclose the accompanying joint proxy statement/prospectus relating to the combination of BFS and BMC in an all-stock merger transaction to create the nation’s premier supplier of building materials and services.

On August 26, 2020, Builders FirstSource and BMC entered into an Agreement and Plan of Merger, as it may be amended from time to time, which is referred to as the merger agreement, pursuant to which they agreed to combine their respective companies in an all-stock merger transaction to create the nation’s premier supplier of building materials and services. Pursuant to the terms of the merger agreement, Boston Merger Sub I Inc., a wholly owned subsidiary of Builders FirstSource that is referred to as Merger Sub, will merge with and into BMC, which transaction is referred to as the merger, with BMC surviving the merger as a wholly owned subsidiary of Builders FirstSource. Following the completion of the merger, Builders FirstSource, BMC, and their respective subsidiaries will operate as a combined company, which is referred to as the combined company, under the name Builders FirstSource, Inc.

Upon completion of the merger, each issued and outstanding share of BMC common stock will be converted into the right to receive 1.3125 shares of BFS common stock, which number is referred to as the exchange ratio. This exchange ratio is fixed and will not be adjusted for changes in the market price of either BFS common stock or BMC common stock between the dates of the signing of the merger agreement and completion of the merger. Following the completion of the merger, BFS stockholders will continue to own their existing shares of BFS common stock and the BFS common stock will continue to be listed on Nasdaq under the symbol “BLDR.”

Immediately following completion of the merger, holders of shares of BFS common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 57% of the issued and outstanding shares of BFS common stock, and holders of shares of BMC common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 43% of the issued and outstanding shares of BFS common stock on a fully diluted basis and based on the number of shares of BFS common stock and BMC common stock outstanding as of November 13, 2020.

Builders FirstSource will issue a fixed number of shares of BFS common stock in exchange for each share of BMC common stock. As a result, the implied value of the merger consideration to be received by BMC stockholders will fluctuate based on any changes in the market price of BFS common stock prior to the completion of the merger. Accordingly, such implied value of the per share merger consideration to be received by BMC stockholders upon completion of the merger could be greater than, less than, or the same as the implied value of the merger consideration on the date of the accompanying joint proxy statement/prospectus. We urge you to obtain current market quotations for the shares of BFS common stock and BMC common stock. BFS common stock and BMC common stock are listed on Nasdaq under the symbols “BLDR” and “BMCH,” respectively.

Builders FirstSource and BMC will each hold special meetings of their respective stockholders in connection with the proposed merger, which are referred to as the BFS stockholder meeting and the BMC stockholder meeting, respectively.

At the BFS stockholder meeting, BFS stockholders will be asked to consider and vote on (1) a proposal to approve the issuance of shares of BFS common stock to BMC stockholders pursuant to the merger agreement, which is referred to as the BFS share issuance proposal, (2) a proposal to adopt an amendment to the certificate of incorporation of Builders FirstSource to increase the number of authorized shares of BFS common stock,


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which is referred to as the BFS charter amendment proposal, and (3) a proposal to adjourn the BFS stockholder meeting to solicit additional proxies if there are not sufficient votes to approve the BFS share issuance proposal or the BFS charter amendment proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to BFS stockholders. The BFS board of directors unanimously recommends that BFS stockholders vote “FOR” each of the proposals to be considered at the BFS stockholder meeting.

At the BMC stockholder meeting, BMC stockholders will be asked to consider and vote on (1) a proposal to adopt the merger agreement, which is referred to as the BMC merger agreement proposal, (2) a proposal to approve, on an advisory (non-binding) basis, specific compensatory arrangements between BMC and its named executive officers relating to the merger, and (3) a proposal to adjourn the BMC stockholder meeting to solicit additional proxies if there are not sufficient votes to approve the BMC merger agreement proposal or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to BMC stockholders. The BMC board of directors unanimously recommends that BMC stockholders vote “FOR” each of the proposals to be considered at the BMC stockholder meeting.

We cannot complete the merger unless the BMC stockholders approve the BMC merger agreement proposal and the BFS stockholders approve both the BFS share issuance proposal and the BFS charter amendment proposal. Your vote on these matters is very important, regardless of the number of shares you own. Whether or not you plan to attend your respective stockholder meeting in person, please promptly complete, sign, and date the accompanying proxy card and return it in the enclosed postage-paid envelope or authorize the individuals named on your proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with your proxy card.

The accompanying joint proxy statement/prospectus provides you with important information about the stockholder meetings, the merger, and each of the proposals. We encourage you to read the entire document (including any documents incorporated by reference into the accompanying joint proxy statement/prospectus) carefully. Please pay particular attention to the section entitled Risk Factors beginning on page 43 of the accompanying joint proxy statement/prospectus.

We look forward to the successful completion of the merger.

Sincerely,

 

LOGO

M. Chad Crow
President and Chief Executive Officer
Builders FirstSource, Inc.

  

LOGO

David E. Flitman

President and Chief Executive Officer

BMC Stock Holdings, Inc.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the BFS common stock to be issued in the merger or determined if the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying joint proxy statement/prospectus is dated November 18, 2020 and is first being mailed to stockholders of Builders FirstSource and BMC on or about November 18, 2020.


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LOGO

Builders FirstSource, Inc.

2001 Bryan Street, Suite 1600

Dallas, Texas 75201

(214) 880-3500

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON DECEMBER 22, 2020

Dear Stockholders of Builders FirstSource, Inc.:

Notice is hereby given that Builders FirstSource, Inc., which is referred to as Builders FirstSource or BFS, will hold a special meeting of its stockholders, which is referred to as the BFS stockholder meeting, for the purpose of considering and voting on the following proposals:

 

  1.

BFS share issuance proposal. To approve the issuance of shares of BFS common stock to the stockholders of BMC Stock Holdings, Inc., which is referred to as BMC, pursuant to the Agreement and Plan of Merger, dated as of August 26, 2020 (as it may be amended from time to time), which is referred to as the merger agreement, by and among Builders FirstSource, BMC, and Boston Merger Sub I Inc., a wholly owned subsidiary of Builders FirstSource, which proposal is referred to as the BFS share issuance proposal;

 

  2.

BFS charter amendment proposal. To adopt an amendment to the certificate of incorporation of Builders FirstSource to increase the number of authorized shares of BFS common stock, which is referred to as the BFS charter amendment proposal; and

 

  3.

BFS adjournment proposal. To approve the adjournment of the BFS stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BFS stockholder meeting, there are not sufficient votes to approve the BFS share issuance proposal or the BFS charter amendment proposal, or if Builders FirstSource is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to BFS stockholders, which is referred to as the BFS adjournment proposal.

Builders FirstSource intends to hold the BFS stockholder meeting in person at the corporate headquarters of Builders FirstSource, located at 2001 Bryan Street, Suite 1600, Dallas, Texas, on December 22, 2020, beginning at 9:00 a.m., Central Time, and to make its list of stockholders entitled to vote at the meeting available at its corporate headquarters during the 10 day period prior to such date. However, Builders FirstSource is sensitive to the public health and travel concerns its stockholders may have and recommendations that public health officials may issue in light of the COVID-19 pandemic. As a result, the BFS board of directors may determine to hold the BFS stockholder meeting virtually in addition to, or in lieu of, holding the BFS stockholder meeting in person, and may determine to make its stockholder list available electronically during the 10-day period prior to the date of the BFS stockholder meeting, in addition to, or in lieu of, making it available at the corporate headquarters. In such event, Builders FirstSource will announce that fact as promptly as practicable after making this determination, and details on how to participate in the BFS stockholder meeting or access the BFS stockholder list, as applicable, will be made available in the press release announcing such determination and will also be posted on its website at https://investors.bldr.com/press-releases. Builders FirstSource encourages you to check its website prior to the BFS stockholder meeting if you plan to attend. Any such announcement would also be filed with the SEC as additional proxy soliciting material.

Builders FirstSource will transact no other business at the BFS stockholder meeting. The accompanying joint proxy statement/prospectus, including the merger agreement attached thereto as Annex A, contains further information with respect to these matters.


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The BFS board of directors has fixed the close of business on November 13, 2020 as the record date for the BFS stockholder meeting, which is referred to as the BFS record date. Only holders of record of BFS common stock at the close of business on the BFS record date are entitled to notice of, and to vote at, the BFS stockholder meeting and any adjournments or postponements thereof.

The BFS board of directors has unanimously authorized and approved and declared advisable the merger agreement and the completion of the merger, the BFS share issuance, and the other transactions contemplated by the merger agreement and approved and adopted the BFS charter amendment, subject to approval of the BFS share issuance and adoption of the BFS charter amendment by BFS stockholders at the BFS stockholder meeting. The BFS board of directors unanimously recommends that BFS stockholders vote FOR the BFS share issuance proposal, FOR the BFS charter amendment proposal, and FOR the BFS adjournment proposal.

Your vote is very important, regardless of the number of shares of BFS common stock you own. We cannot complete the transactions contemplated by the merger agreement without approval of the BFS share issuance proposal and the BFS charter amendment proposal. Approval of the BFS share issuance proposal requires the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting. The approval of the BFS charter amendment proposal requires the affirmative vote of a majority of the outstanding shares of BFS common stock entitled to vote on such proposal.

Whether or not you plan to attend the BFS stockholder meeting in person, we urge you to please promptly complete, sign, and date the accompanying proxy card and return it in the enclosed postage-paid envelope or authorize the individuals named on the proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with the proxy card. If your shares are held in the name of a bank, broker, or other nominee, please follow the instructions on the voting instruction card furnished by such bank, broker, or other nominee. If you are a registered stockholder and choose to vote your shares in person at the BFS stockholder meeting, please bring the enclosed proxy card and current, government-issued photo identification. If you hold your shares through a bank, broker, or other nominee, then you must also present a legal proxy in order to vote in person at the BFS stockholder meeting. The use of video, still photography, or audio recording at the BFS stockholder meeting is not permitted. For the safety of attendees, all bags, packages, and briefcases are subject to inspection. Your compliance is appreciated.

If you have any questions about this notice, the merger, the accompanying joint proxy statement/prospectus, or how to vote or direct a vote in respect of your shares of BFS common stock, you may contact Builders FirstSource’s proxy solicitor, Morrow Sodali LLC, at (800) 662-5200, or Builders FirstSource at (214) 880-3500, or write to Builders FirstSource, Inc., Attention: Corporate Secretary, 2001 Bryan Street, Suite 1600, Dallas, Texas 75201.

 

By Order of the Board of Directors,

LOGO

Donald F. McAleenan,

Senior Vice President and General Counsel

Dallas, Texas

Dated: November 18, 2020

 

 

Your vote is important. BFS stockholders are requested to complete, date, sign, and return the enclosed proxy card in the envelope provided, which requires no postage if mailed in the United States, or to submit their votes electronically through the Internet or by telephone.


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LOGO

BMC Stock Holdings, Inc.

4800 Falls of Neuse Road, Suite 400

Raleigh, NC 27609

(919) 431-1000

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON DECEMBER 22, 2020

Dear Stockholders of BMC Stock Holdings, Inc.:

Notice is hereby given that BMC Stock Holdings, Inc., which is referred to as BMC, will hold a special meeting of its stockholders, which is referred to as the BMC stockholder meeting, for the purpose of considering and voting on the following proposals:

 

  1.

BMC merger agreement proposal. To adopt the Agreement and Plan of Merger, dated as of August 26, 2020 (as it may be amended from time to time), which is referred to as the merger agreement, by and among Builders FirstSource, Inc., referred to as Builders FirstSource or BFS, BMC, and Boston Merger Sub I Inc., a wholly owned subsidiary of Builders FirstSource, which proposal is referred to as the BMC merger agreement proposal;

 

  2.

BMC compensation proposal. To approve, on an advisory (non-binding) basis, the executive officer compensation that will or may be paid to BMC’s named executive officers in connection with the transactions contemplated by the merger agreement, which is referred to as the BMC compensation proposal; and

 

  3.

BMC adjournment proposal. To approve the adjournment of the BMC stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BMC stockholder meeting, there are not sufficient votes to approve the BMC merger agreement proposal, or if BMC is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to the accompanying joint proxy statement/prospectus is timely provided to BMC stockholders, which is referred to as the BMC adjournment proposal.

BMC intends to hold the BMC stockholder meeting in person at the Embassy Suites, 8001 Arco Corporate Drive, Raleigh, North Carolina 27617, on December 22, 2020, beginning at 10:00 a.m., Eastern Time, and to make its list of stockholders entitled to vote at the meeting available at its corporate headquarters during the 10 day period prior to such date. However, BMC is sensitive to the public health and travel concerns its stockholders may have and recommendations that public health officials may issue in light of the COVID-19 pandemic. As a result, the BMC board of directors may determine to hold the BMC stockholder meeting virtually in addition to, or in lieu of, holding the BMC stockholder meeting in person, and may determine to make its stockholder list available electronically during the 10-day period prior to the date of the BMC stockholder meeting, in addition to, or in lieu of, making it available at the corporate headquarters. In such event, BMC will announce that fact as promptly as practicable after making this determination, and details on how to participate in the BMC stockholder meeting or access the BMC stockholder list, as applicable, will be made available in the press release announcing such determination and will also be posted on its website at ir.buildwithbmc.com. BMC encourages you to check its website prior to the BMC stockholder meeting if you plan to attend. Any such announcement would also be filed with the SEC as additional proxy soliciting material.

BMC will transact no other business at the BMC stockholder meeting. The accompanying joint proxy statement/prospectus, including the merger agreement attached thereto as Annex A, contains further information with respect to these matters.


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The BMC board of directors has fixed the close of business on November 13, 2020 as the record date for the BMC stockholder meeting, which is referred to as the BMC record date. Only holders of record of BMC common stock at the close of business on the BMC record date are entitled to notice of, and to vote at, the BMC stockholder meeting and any adjournments or postponements thereof.

The BMC board of directors has unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement on the terms and subject to the conditions set forth in the merger agreement. The BMC board of directors unanimously recommends that BMC stockholders vote “FOR” the BMC merger agreement proposal, “FOR” the BMC compensation proposal, and “FOR” the BMC adjournment proposal.

Your vote is very important, regardless of the number of shares of BMC common stock you own. We cannot complete the transactions contemplated by the merger agreement without approval of the BMC merger agreement proposal. Approval of the BMC merger agreement proposal requires the affirmative vote of a majority of the outstanding shares of BMC common stock entitled to vote on the BMC merger agreement proposal.

Whether or not you plan to attend the BMC stockholder meeting in person, we urge you to please promptly complete, sign, and date the accompanying proxy card and return it in the enclosed postage-paid envelope or authorize the individuals named on the proxy card to vote your shares by calling the toll-free telephone number or by using the Internet as described in the instructions included with the proxy card. If your shares are held in the name of a bank, broker, or other nominee, please follow the instructions on the enclosed voting instruction form furnished by such bank, broker, or other nominee. If you are a registered stockholder and choose to vote your shares in person at the BMC stockholder meeting, please bring the enclosed proxy card and current, government-issued photo identification. If you hold your shares through a bank, broker, or other nominee, then you must also present a legal proxy in order to vote in person at the BMC stockholder meeting. The use of video, still photography, or audio recording at the BMC stockholder meeting is not permitted. For the safety of attendees, all bags, packages, and briefcases are subject to inspection. Your compliance is appreciated.

If you have any questions about this notice, the merger, the accompanying joint proxy statement/prospectus or how to vote or direct a vote in respect of your shares of BMC common stock, you may contact BMC’s proxy solicitor, Innisfree M&A Incorporated. Stockholders may call toll-free at (877) 750-8166; banks and brokers may call collect at (212) 750-8533.

 

By Order of the Board of Directors,

LOGO
Timothy D. Johnson,
Executive Vice President, General Counsel and Corporate Secretary

Raleigh, North Carolina

Dated: November 18, 2020

 

 

Your vote is important. BMC stockholders are requested to complete, date, sign, and return the enclosed proxy card in the envelope provided, which requires no postage if mailed in the United States, or to submit their votes electronically through the Internet or by telephone.


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REFERENCES TO ADDITIONAL INFORMATION

The accompanying joint proxy statement/prospectus incorporates important business and financial information about Builders FirstSource and BMC from other documents that Builders FirstSource and BMC have filed with the U.S. Securities and Exchange Commission, which is referred to as the SEC, and that are contained in or incorporated by reference into the accompanying joint proxy statement/prospectus. For a listing of documents incorporated by reference into the accompanying joint proxy statement/prospectus, please see the section entitled “Where You Can Find More Information” beginning on page 213. This information is available for you free of charge to review through the SEC’s website at www.sec.gov.

Any person may request a copy of any of the documents incorporated by reference into the accompanying joint proxy statement/prospectus, without charge, by written or telephonic request directed to the appropriate company or its proxy solicitor at the following contacts:

 

For BFS stockholders:    For BMC stockholders:
Builders FirstSource, Inc.    BMC Stock Holdings, Inc.
2001 Bryan Street, Suite 1600    4800 Falls of Neuse Road, Suite 400
Dallas, Texas 75201    Raleigh, North Carolina 27609
(214) 880-3500    (919) 431-1000
Attention: Corporate Secretary    Attention: Corporate Secretary
Morrow Sodali LLC    Innisfree M&A Incorporated
509 Madison Avenue, Suite 1206    501 Madison Avenue, 20th Floor
New York, New York 10022    New York, New York 10022
Stockholders may call toll-free: (800) 662-5200    Stockholders may call toll-free: (877) 750-8166
   Banks and brokers may call collect: (212) 750-5833

In order for you to receive timely delivery of any requested documents in advance of the BFS stockholder meeting or the BMC stockholder meeting, you must request the information no later than December 15, 2020.

The contents of the websites of the SEC, Builders FirstSource, BMC, or any other entity are not being incorporated into the accompanying joint proxy statement/prospectus. The information about how you can obtain certain documents that are incorporated by reference into the accompanying joint proxy statement/prospectus at these websites is being provided only for your convenience.


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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Builders FirstSource (File No. 333-249376), constitutes a prospectus of Builders FirstSource under Section 5 of the Securities Act of 1933, as amended, which is referred to as the Securities Act, with respect to the shares of common stock of Builders FirstSource to be issued to BMC stockholders pursuant to the Agreement and Plan of Merger, dated as of August 26, 2020, by and among Builders FirstSource, BMC, and Merger Sub, as it may be amended from time to time, which is referred to as the merger agreement. This document also constitutes a joint proxy statement of Builders FirstSource and BMC under Section 14(a) of the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act. It also constitutes a notice of meeting with respect to the BFS stockholder meeting and a notice of meeting with respect to the BMC stockholder meeting.

Builders FirstSource has supplied all information contained or incorporated by reference into this joint proxy statement/prospectus relating to Builders FirstSource, and BMC has supplied all such information relating to BMC. Builders FirstSource and BMC have both contributed to the information related to the merger contained in this joint proxy statement/prospectus.

You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. Builders FirstSource and BMC have not authorized anyone to provide you with information that is different from the information contained in or incorporated by reference into this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated November 18, 2020, and you should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein.

Further, you should not assume that the information incorporated by reference into this joint proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing to BFS stockholders or BMC stockholders, nor the issuance by Builders FirstSource of shares of its common stock pursuant to the merger agreement, will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

All references in this joint proxy statement/prospectus to “Builders FirstSource” or “BFS” refer to Builders FirstSource, Inc., a Delaware corporation; all references to “Merger Sub” refer to Boston Merger Sub I Inc., a Delaware corporation and wholly owned subsidiary of Builders FirstSource formed for the purpose of effecting the merger as described in this joint proxy statement/prospectus. All references in this joint proxy statement/prospectus to “BMC” refer to BMC Stock Holdings, Inc., a Delaware corporation. All references in this joint proxy statement/prospectus to “combined company” refer to Builders FirstSource immediately following completion of the merger and the other transactions contemplated by the merger agreement. All references in this joint proxy statement/prospectus to “BFS common stock” refer to the common stock, par value $0.01 per share, of Builders FirstSource, and all references in this joint proxy statement/prospectus to “BMC common stock” refer to the common stock, par value $0.01 per share, of BMC.


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TABLE OF CONTENTS

 

     Page  

TABLE OF CONTENTS

     i  

QUESTIONS AND ANSWERS

     1  

SUMMARY

     17  

The Parties to the Merger

     17  

The BFS Stockholder Meeting

     18  

The BMC Stockholder Meeting

     19  

The Merger and the Merger Agreement

     20  

Exchange Ratio; Merger Consideration

     20  

Treatment of Existing BMC Equity Awards

     20  

Recommendation of the BFS Board of Directors; Builders FirstSource’s Reasons for the Merger

     21  

Recommendation of the BMC Board of Directors; BMC’s Reasons for the Merger

     21  

Opinion of Builders FirstSource’s Financial Advisor

     22  

Opinion of BMC’s Financial Advisor

     22  

Proxy Solicitation Costs

     23  

Governance of the Combined Company

     23  

Regulatory Approvals

     24  

Ownership of the Combined Company after the Merger

     25  

No Solicitation of Acquisition Proposals

     25  

Conditions to the Completion of the Merger

     26  

Termination of the Merger Agreement

     27  

Termination Fees

     28  

Material United States Federal Income Tax Consequences

     29  

Accounting Treatment

     30  

Listing of BFS Common Stock; Delisting and Deregistration of BMC Common Stock

     30  

Interests of Builders FirstSource’s Directors and Executive Officers in the Merger

     30  

Interests of BMC’s Directors and Executive Officers in the Merger

     31  

Comparison of Stockholders’ Rights

     31  

No Appraisal Rights

     31  

Certain Beneficial Owners of BFS Common Stock

     31  

Certain Beneficial Owners of BMC Common Stock

     32  

Litigation Relating to the Merger

     32  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BUILDERS FIRSTSOURCE

     33  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BMC

     35  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     37  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     38  

COMPARISON OF BUILDERS FIRSTSOURCE AND BMC MARKET PRICES AND IMPLIED VALUE OF MERGER CONSIDERATION

     39  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     40  

RISK FACTORS

     43  

Risks Relating to the Merger

     43  

Risks Relating to the Combined Company Following the Merger

     51  

Risks Relating to Builders FirstSource’s Business

     56  

Risks Relating to BMC’s Business

     56  

THE PARTIES TO THE MERGER

     57  

THE BFS STOCKHOLDER MEETING

     59  

Date, Time and Place of the BFS Stockholder Meeting

     59  

Matters to be Considered at the BFS Stockholder Meeting

     59  

Recommendation of the BFS Board of Directors

     59  

BFS Record Date; Voting Rights

     60  

 

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Quorum; Abstentions; Broker Non-Votes

     60  

Required Votes; Vote of Builders FirstSource’s Directors and Executive Officers

     61  

Methods of Voting

     61  

Revocability of Proxies

     62  

Proxy Solicitation Costs

     63  

Attending the BFS Stockholder Meeting

     63  

Householding

     64  

Tabulation of Votes; Results of the BFS Stockholder Meeting

     64  

Adjournments

     64  

Assistance

     65  

BFS PROPOSAL 1—BFS SHARE ISSUANCE PROPOSAL

     66  

BFS PROPOSAL 2—BFS CHARTER AMENDMENT PROPOSAL

     67  

BFS PROPOSAL 3—BFS ADJOURNMENT PROPOSAL

     68  

THE BMC STOCKHOLDER MEETING

     69  

Date, Time and Place of the BMC Stockholder Meeting

     69  

Matters to be Considered at the BMC Stockholder Meeting

     69  

Recommendation of the BMC Board of Directors

     69  

BMC Record Date; Voting Rights

     70  

Quorum; Abstentions; Broker Non-Votes

     70  

Required Votes; Vote of BMC’s Directors and Executive Officers

     70  

Methods of Voting

     71  

Revocability of Proxies

     72  

Proxy Solicitation Costs

     73  

Attending the BMC Stockholder Meeting

     73  

Householding

     73  

Tabulation of Votes; Results of the BMC Stockholder Meeting

     74  

Adjournments

     74  

Assistance

     75  

BMC PROPOSAL 1—BMC MERGER AGREEMENT PROPOSAL

     76  

BMC PROPOSAL 2—BMC COMPENSATION PROPOSAL

     77  

BMC PROPOSAL 3—BMC ADJOURNMENT PROPOSAL

     78  

THE MERGER

     79  

General

     79  

Exchange Ratio

     79  

Background of the Merger

     79  

Recommendation of the BFS Board of Directors; Builders FirstSource’s Reasons for the Merger

     99  

Recommendation of the BMC Board of Directors; BMC’s Reasons for the Merger

     104  

Opinion of Builders FirstSource’s Financial Advisor

     108  

Opinion of BMC’s Financial Advisor

     117  

Certain Unaudited Prospective Financial Information

     124  

Certain Estimated Synergies

     129  

Completion and Effective Time of the Merger

     130  

Regulatory Approvals

     130  

Ownership of the Combined Company after the Merger

     131  

Governance of the Combined Company

     131  

U.S. Federal Securities Law Consequences

     132  

Accounting Treatment

     132  

Exchange of Shares

     133  

No Appraisal Rights

     134  

Nasdaq Market Listing

     134  

Delisting and Deregistration of BMC Common Stock

     135  

 

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Litigation Relating to the Merger

     135  

THE MERGER AGREEMENT

     136  

Explanatory Note Regarding the Merger Agreement

     136  

Structure of the Merger

     136  

Completion and Effectiveness of the Merger

     136  

Merger Consideration

     137  

Treatment of Equity Awards

     139  

Termination of the Exchange Fund

     140  

Combined Company Governance Matters

     140  

Surviving Corporation Governance and Merger Sub Shares

     140  

Conduct of Business Prior to the Effective Time

     141  

Stockholder Meetings

     144  

No Solicitation of Acquisition Proposals

     144  

No Change of Recommendation

     146  

Cooperation; Efforts to Complete

     148  

Status and Notifications

     149  

Financing and Indebtedness

     149  

Employee Benefits Matters

     149  

Indemnification; Directors’ and Officers’ Insurance

     150  

Litigation

     151  

Other Covenants and Agreements

     151  

Conditions to the Completion of the Merger

     152  

Termination of the Merger Agreement

     154  

Termination Fees

     156  

Representations and Warranties

     157  

Material Adverse Effect

     159  

Amendment

     160  

Waiver

     160  

Third-Party Beneficiaries

     161  

Specific Performance

     161  

Applicable Law

     161  

Expenses

     161  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     162  

Notes to Unaudited Pro Forma Condensed Combined Financial Information

     167  

INTERESTS OF BUILDERS FIRSTSOURCE’S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

     176  

INTERESTS OF BMC’S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

     178  

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     186  

Treatment of the Merger

     187  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     188  

NO APPRAISAL RIGHTS

     203  

LEGAL MATTERS

     204  

EXPERTS

     205  

CERTAIN BENEFICIAL OWNERS OF BFS COMMON STOCK

     206  

CERTAIN BENEFICIAL OWNERS OF BMC COMMON STOCK

     208  

STOCKHOLDER PROPOSALS

     210  

HOUSEHOLDING OF PROXY MATERIALS

     212  

WHERE YOU CAN FIND MORE INFORMATION

     213  

AGREEMENT AND PLAN OF MERGER

     A-1  

PROPOSED BFS CHARTER AMENDMENT

     B-1  

WRITTEN OPINION OF ROTHSCHILD & CO.

     C-1  

WRITTEN OPINION OF MOELIS

     D-1  

 

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QUESTIONS AND ANSWERS

The following are some questions that you, as a stockholder of Builders FirstSource or a stockholder of BMC, may have regarding the merger and the other matters being considered at the special meetings of each company’s respective stockholders, along with brief answers to those questions. These questions and answers may not address all questions that may be important to BFS stockholders or BMC stockholders. You are urged to carefully read this joint proxy statement/prospectus and the other documents referred to in this joint proxy statement/prospectus in their entirety because this section may not provide all the information that is important to you regarding these matters. Additional important information is contained in the annexes to, and the documents incorporated by reference into, this joint proxy statement/prospectus. You may obtain any of the documents incorporated by reference into this joint proxy statement/prospectus, without charge, by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 213.

 

Q:

Why am I receiving this document?

 

A:

Builders FirstSource and BMC have agreed to combine their companies in a merger transaction structured as a merger of Merger Sub with and into BMC, with BMC surviving the merger as a wholly owned subsidiary of Builders FirstSource. The merger agreement governs the terms of the merger of BMC and Merger Sub, which is referred to as the merger, and is attached as Annex A to this joint proxy statement/prospectus.

In order to complete the merger, among other things:

 

   

BMC stockholders must adopt the merger agreement in accordance with the Delaware General Corporation Law, referred to as the DGCL, which proposal is referred to as the BMC merger agreement proposal;

 

   

BFS stockholders must approve the issuance of shares of BFS common stock pursuant to the merger agreement, which is referred to as the BFS share issuance and which proposal is referred to as the BFS share issuance proposal; and

 

   

BFS stockholders must adopt an amendment, which is referred to as the BFS charter amendment, to Builders FirstSource’s certificate of incorporation, which is referred to as the BFS charter, to increase the number of authorized shares of BFS common stock, which proposal is referred to as the BFS charter amendment proposal.

Builders FirstSource is holding a special meeting of its stockholders, which is referred to as the BFS stockholder meeting, to obtain approval of the BFS share issuance proposal and the BFS charter amendment proposal. BFS stockholders will also be asked to approve a proposal to adjourn the BFS stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BFS stockholder meeting, there are not sufficient votes to approve the BFS share issuance proposal, or if Builders FirstSource is otherwise required or permitted to do so pursuant to the merger agreement, or the BFS charter amendment proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to BFS stockholders, which proposal is referred to as the BFS adjournment proposal.

BMC is holding a special meeting of its stockholders, which is referred to as the BMC stockholder meeting, to obtain approval of the BMC merger agreement proposal. BMC stockholders will also be asked to approve, on an advisory (non-binding) basis, the compensation that will or may be paid to BMC’s named executive officers in connection with, based upon, or otherwise relating to the transactions contemplated by the merger agreement, which proposal is referred to as the BMC compensation proposal, and to approve a proposal to adjourn the BMC stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BMC stockholder meeting, there are not sufficient votes to approve the BMC merger agreement proposal, or if BMC is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to BMC stockholders, which proposal is referred to as the BMC adjournment proposal.

 

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This document, which is referred to as the joint proxy statement/prospectus, is being delivered to you as both a joint proxy statement of Builders FirstSource and BMC and a prospectus of Builders FirstSource in connection with the merger and the BFS share issuance. It is the proxy statement by which the BFS board of directors is soliciting proxies from Builders FirstSource stockholders to vote at the BFS stockholder meeting (or any adjournment or postponement thereof) on the approval of the BFS share issuance proposal, the BFS charter amendment proposal, and the BFS adjournment proposal. It is also the proxy statement by which the BMC board of directors is soliciting proxies from BMC stockholders to vote at the BMC stockholder meeting (or any adjournment or postponement thereof) on the approval of the BMC merger agreement proposal, the BMC compensation proposal, and the BMC adjournment proposal. In addition, this document is the prospectus by which Builders FirstSource will issue shares of BFS common stock to BMC stockholders in the merger.

We encourage you to vote as soon as possible. Your vote is very important, regardless of the number of shares that you own. The approval of the BFS share issuance proposal and the adoption of the BFS charter amendment proposal and the BMC merger agreement proposal are conditions to the obligations of Builders FirstSource and BMC to complete the merger.

 

Q:

When and where will each of the stockholder meetings take place?

 

A:

The BFS stockholder meeting will be held at the corporate headquarters of Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, on December 22, 2020 at 9:00 a.m., Central Time.

The BMC stockholder meeting will be held at the Embassy Suites, 8001 Arco Corporate Drive, Raleigh, North Carolina 27617, on December 22, 2020, at 10:00 a.m., Eastern Time.

If you choose to vote your shares in person at your respective company’s stockholder meeting, please bring your enclosed proxy card and current, government-issued photo identification. The use of video, still photography, or audio recording at each of the stockholder meetings is not permitted. For the safety of attendees, all bags, packages, and briefcases are subject to inspection.

Even if you plan to attend your respective company’s stockholder meeting, BMC and Builders FirstSource recommend that you submit a proxy to vote your shares in advance as described below so that your vote will be counted if you later decide not to, or become unable to, attend the applicable stockholder meeting. Shares held in “street name” may be voted in person by you only if you obtain a signed legal proxy from your bank, broker, or other nominee giving you the right to vote the shares.

In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, either the BFS board of directors or the BMC board of directors determines to hold the BFS stockholder meeting or the BMC stockholder meeting virtually in addition to, or in lieu of, holding the applicable stockholder meeting in person, Builders FirstSource or BMC, as applicable, will announce that fact as promptly as practicable after making such determination, and details on how to participate will be made available in the press release announcing such determination and will also be posted on the applicable company’s website at http://investors.bldr.com/press-releases or ir.buildwithbmc.com, respectively.

 

Q:

What matters will be considered at each of the stockholder meetings?

 

A:

At the BFS stockholder meeting, the stockholders of Builders FirstSource will be asked to consider and vote on the following proposals:

 

   

Approval of the issuance of shares of BFS common stock to BMC stockholders pursuant to the merger agreement.

 

   

Adoption of an amendment to the BFS charter to increase the number of authorized shares of BFS common stock.

 

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Approval of the adjournment of the BFS stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BFS stockholder meeting, there are not sufficient votes to approve the BFS share issuance proposal or adopt the BFS charter amendment proposal, or if Builders FirstSource is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to the BFS stockholders.

At the BMC stockholder meeting, stockholders of BMC will be asked to consider and vote on the following proposals:

 

   

Adoption of the merger agreement.

 

   

Approval of, on an advisory (non-binding) basis, the compensation that will or may be paid to BMC’s named executive officers in connection with, based upon, or otherwise relating to the transactions contemplated by the merger agreement.

 

   

Approval of the adjournment of the BMC stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BMC stockholder meeting, there are not sufficient votes to approve the BMC merger agreement proposal, or if BMC is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to the BMC stockholders.

The approval of the BFS share issuance proposal and the adoption of the BFS charter amendment proposal and the BMC merger agreement proposal are conditions to the obligations of Builders FirstSource and BMC to complete the merger. None of the approvals of the BFS adjournment proposal, the BMC compensation proposal or the BMC adjournment proposal are conditions to the obligations of Builders FirstSource or BMC to complete the merger.

 

Q:

Does my vote matter?

 

A:

Yes. Your vote is very important, regardless of the number of shares you own. The merger cannot be completed unless the merger agreement is adopted by BMC stockholders, the BFS share issuance is approved by BFS stockholders, and the BFS charter amendment is adopted by BFS stockholders.

For BFS stockholders, if you do not return or submit your proxy or vote at the stockholder meeting as provided in this joint proxy statement/prospectus, the effect will be the same as a vote “AGAINST” the BFS charter amendment proposal. The BFS board of directors unanimously recommends that you vote “FOR” the BFS share issuance proposal, “FOR” the BFS charter amendment proposal, and “FOR” the BFS adjournment proposal.

For BMC stockholders, if you do not return or submit your proxy or vote at the stockholder meeting as provided in this joint proxy statement/prospectus, the effect will be the same as a vote “AGAINST” the BMC merger agreement proposal. The BMC board of directors unanimously recommends that you vote “FOR” the BMC merger agreement proposal, “FOR” the BMC compensation proposal, and “FOR” the BMC adjournment proposal.

 

Q:

How does the BFS board of directors recommend that I vote at the BFS stockholder meeting?

 

A:

The BFS board of directors unanimously recommends that you vote “FOR” the BFS share issuance proposal, “FOR” the BFS charter amendment proposal, and “FOR” the BFS adjournment proposal.

In considering the recommendations of the BFS board of directors, BFS stockholders should be aware that Builders FirstSource’s directors and executive officers may have interests in the merger that are different

 

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from, or in addition to, the interests of BFS stockholders generally. For a description of these interests, please see the information provided in the section entitled “Interests of Builders FirstSource’s Directors and Executive Officers in the Merger” beginning on page 176.

 

Q:

How does the BMC board of directors recommend that I vote at the BMC stockholder meeting?

 

A:

The BMC board of directors unanimously recommends that you vote “FOR” the BMC merger agreement proposal, “FOR” the BMC compensation proposal, and “FOR” the BMC adjournment proposal.

In considering the recommendations of the BMC board of directors, BMC stockholders should be aware that BMC’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of BMC stockholders generally. These interests may include, among others, the payment of severance benefits and acceleration of outstanding BMC equity awards at the completion of the merger, and the execution of an employment agreement by and between Builders FirstSource, BMC, and David E. Flitman, effective as of and contingent upon the completion of the merger. For a description of these interests, please see the information provided in the section entitled “Interests of BMC’s Directors and Executive Officers in the Merger” beginning on page 178.

 

Q:

Who is entitled to vote at the BFS stockholder meeting?

 

A:

The record date for the BFS stockholder meeting is November 13, 2020, which is referred to as the BFS record date. All holders of shares of BFS common stock who held shares at the close of business on the BFS record date are entitled to receive notice of, and to vote at, the BFS stockholder meeting (or any adjournment or postponement thereof). Each such holder of BFS common stock is entitled to cast one vote on each matter properly brought before the BFS stockholder meeting for each share of BFS common stock that such holder owned of record as of the BFS record date. Physical attendance at the stockholder meeting is not required for your shares of BFS common stock to be present and voted at the meeting. Please see the section entitled “The BFS Stockholder Meeting—Methods of Voting” beginning on page 61 for instructions on how to vote your shares without attending the BFS stockholder meeting.

 

Q:

Who is entitled to vote at the BMC stockholder meeting?

 

A:

The record date for the BMC stockholder meeting is November 13, 2020, which is referred to as the BMC record date. All holders of shares of BMC common stock who held shares at the close of business on the BMC record date are entitled to receive notice of, and to vote at, the BMC stockholder meeting (or any adjournment or postponement thereof). Each holder of BMC common stock is entitled to cast one vote on each matter properly brought before the BMC stockholder meeting for each share of BMC common stock that such holder owned of record as of the BMC record date. Physical attendance at the stockholder meeting is not required for your shares of BMC common stock to be present and voted at the meeting. Please see the section entitled “The BMC Stockholder Meeting—Methods of Voting” beginning on page 71 for instructions on how to vote your shares without attending the BMC stockholder meeting.

 

Q:

What is a proxy?

 

A:

A proxy is a stockholder’s legal designation of another person, which is referred to as a proxy, to vote shares of such stockholder’s common stock at a stockholder meeting. The document used to designate a proxy to vote your shares of BFS common stock or BMC common stock, as applicable, is referred to as a proxy card.

 

Q:

How many votes do I have for the BFS stockholder meeting?

 

A:

Each BFS stockholder is entitled to one vote for each share of BFS common stock held of record as of the close of business on the BFS record date on each proposal presented at the BFS stockholder meeting. As of the close of business on the BFS record date, there were 116,821,189 outstanding shares of BFS common stock.

 

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Q:

How many votes do I have for the BMC stockholder meeting?

 

A:

Each BMC stockholder is entitled to one vote for each share of BMC common stock held of record as of the close of business on the BMC record date on each proposal presented at the BMC stockholder meeting. As of the close of business on the BMC record date, there were 67,283,930 outstanding shares of BMC common stock.

 

Q:

What constitutes a quorum for the BFS stockholder meeting?

 

A:

The holders of a majority of the outstanding shares of BFS common stock entitled to vote at the BFS stockholder meeting must be represented (in person or by proxy) at the BFS stockholder meeting (or any adjournment or postponement thereof) in order to constitute a quorum. Shares of BFS common stock represented (in person or by proxy) at the BFS stockholder meeting (or any adjournment or postponement thereof) and entitled to vote, but not voted, including shares for which a stockholder directs an “abstention” from voting and broker non-votes, if any, will be counted for purposes of determining a quorum.

 

Q:

What constitutes a quorum for the BMC stockholder meeting?

 

A:

The holders of a majority of the outstanding shares of BMC common stock entitled to vote at the BMC stockholder meeting must be represented (in person or by proxy) at the BMC stockholder meeting in order to constitute a quorum. Shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting and entitled to vote, but not voted, including shares for which a stockholder directs an “abstention” from voting and broker non-votes, if any, will be counted for purposes of determining a quorum.

 

Q:

What is a “broker non-vote”?

 

A:

A “broker non-vote” results when banks, brokers, and other nominees return a valid proxy but do not vote on a particular proposal because (i) they do not have discretionary authority to vote on the matter because it is “non-routine” in nature, (ii) they have not received specific voting instructions from the beneficial owner of such shares, and (iii) at least one “routine” matter for which they do have discretionary authority to cast a vote appears on the same proxy. In such a case, the brokers would physically cross out the proposals on which they do not have voting discretion, and the crossed out proposals are the broker non-votes. If, as here, however, the only proposals at a meeting are non-routine, there will be no broker discretionary voting on at least one proposal. Thus, there will be no broker non-votes present at the stockholder meetings. In certain instances, a “broker non-vote,” if any, will have the same effect as a vote “AGAINST” a proposal. Please see the sections entitled “The BFS Stockholder Meeting—Quorum; Abstentions and Broker Non-Votes” and “The BMC Stockholder Meeting—Quorum; Abstentions and Broker Non-Votes” beginning on pages 60 and 70, respectively.

 

Q:

What stockholder vote is required for the approval of each proposal at the BFS stockholder meeting? What will happen if I fail to vote or abstain from voting on each proposal at the BFS stockholder meeting?

 

A:

BFS share issuance proposal. Approval of the BFS share issuance by the BFS stockholders requires the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting (or any adjournment or postponement thereof). Accordingly, a BFS stockholder’s abstention from voting (either by attending the BFS stockholder meeting in person and abstaining from voting or responding by proxy with an “abstain” vote) will have the same effect as a vote “AGAINST” the BFS share issuance proposal, while a broker non-vote, if any, or the failure of a BFS stockholder who does not attend the BFS stockholder meeting in person to vote (including the failure of a BFS stockholder who holds shares in “street name” through a bank, broker, or other nominee to give voting instructions to that bank, broker, or other nominee) will have no effect on the BFS share issuance proposal.

 

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BFS charter amendment proposal. Adoption of the BFS charter amendment by the BFS stockholders requires the affirmative vote of a majority of the outstanding shares of BFS common stock entitled to vote on such proposal. Accordingly, a BFS stockholder’s abstention from voting, a broker non-vote, if any, or the failure of a BFS stockholder to vote (including the failure of a BFS stockholder who holds shares in “street name” through a bank, broker, or other nominee to give voting instructions to that bank, broker, or other nominee) will have the same effect as a vote “AGAINST” the BFS charter amendment proposal.

BFS adjournment proposal. The BFS stockholder meeting may be adjourned to solicit additional proxies if, within three business days prior to the date of the BFS stockholder meeting, there are not sufficient votes to approve the BFS share issuance proposal or the BFS charter amendment proposal, or if Builders FirstSource is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to the BFS stockholders. Whether or not a quorum is present, the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting (or any adjournment or postponement thereof) is required to adjourn the BFS stockholder meeting (or any adjournment or postponement thereof). Accordingly, a BFS stockholder’s abstention from voting (either by attending the BFS stockholder meeting in person and abstaining from voting or responding by proxy with an «abstention» vote) will have the same effect as a vote “AGAINST” the BFS adjournment proposal, while a broker non-vote, if any, or the failure of a BFS stockholder who does not attend the BFS stockholder meeting in person to vote (including the failure of a BFS stockholder who holds shares in “street name” through a bank, broker, or other nominee to give voting instructions to that bank, broker, or other nominee) will have no effect on the BFS adjournment proposal.

 

Q:

What stockholder vote is required for the approval of each proposal at the BMC stockholder meeting? What will happen if I fail to vote or abstain from voting on each proposal at the BMC stockholder meeting?

 

A:

BMC merger agreement proposal. Adoption of the merger agreement by the stockholders of BMC requires the affirmative vote of a majority of the outstanding shares of BMC common stock entitled to vote on such proposal. Accordingly, a BMC stockholder’s abstention from voting, a broker non-vote, if any, or the failure of a BMC stockholder to vote (including the failure of a BMC stockholder who holds shares in “street name” through a bank, broker, or other nominee to give voting instructions to that bank, broker, or other nominee) will have the same effect as a vote “AGAINST” the proposal.

BMC compensation proposal. Approval of the BMC compensation proposal requires the affirmative vote of the holders of a majority of the shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting and entitled to vote on such proposal. Accordingly, a BMC stockholder’s abstention from voting will have the same effect as a vote “AGAINST” the BMC compensation proposal, while a broker non-vote, if any, or the failure of a BMC stockholder to vote (including the failure of a BMC stockholder who holds shares in “street name” through a bank, broker, or other nominee to give voting instructions to that bank, broker, or other nominee) will have no effect on the BMC compensation proposal, assuming a quorum is present.

BMC adjournment proposal. The BMC stockholder meeting may be adjourned to solicit additional proxies if, within three business days prior to the date of the BMC stockholder meeting, there are not sufficient votes to approve the BMC merger agreement proposal, or if BMC is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to the BMC stockholders. The affirmative vote of the holders of a majority of the shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting and entitled to vote on the proposal is required to approve the proposal adjourn the BMC stockholder meeting. A BMC stockholder’s abstention from voting will have the same effect as a vote “AGAINST” the BMC adjournment proposal, while a broker non-vote, if any, or the failure of a BFS stockholder to vote (including the failure of a BMC stockholder who holds shares in “street name” through a

 

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bank, broker, or other nominee to give voting instructions to that bank, broker, or other nominee) will have no effect on the BMC adjournment proposal. The chairman of the BMC stockholder meeting may also adjourn the meeting, whether or not there is a quorum.

 

Q:

Why am I being asked to consider and cast an advisory (non-binding) vote on the BMC compensation proposal?

 

A:

Under SEC rules, BMC is required to seek an advisory (non-binding) vote of its stockholders with respect to the compensation that will or may be paid or become payable to BMC’s named executive officers in connection with, based upon, or otherwise relating to the merger, also known as “golden parachute” compensation.

 

Q:

What happens if BMC stockholders do not approve, by an advisory (non-binding) vote, the BMC compensation proposal?

 

A:

Approval of the BMC compensation proposal is not required, nor is it a condition to the obligations of BMC, Builders FirstSource, or Merger Sub to complete the merger. The vote is an advisory (non-binding) vote. If the merger agreement is adopted by BMC stockholders, the BFS share issuance is approved by BFS stockholders, and the BFS charter amendment is adopted by BFS stockholders, then the merger-related compensation will or may be paid to BMC’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements, regardless of the outcome of the vote on the BMC compensation proposal.

 

Q:

What if I hold shares in both Builders FirstSource and BMC?

 

A:

If you are both a BFS stockholder and a BMC stockholder, you will receive separate packages of proxy materials from each company. A vote cast as a BFS stockholder will not count as a vote cast as a BMC stockholder, and a vote cast as a BMC stockholder will not count as a vote cast as a BFS stockholder. Therefore, please complete, sign, date, and return your proxy card (or cast your vote over the Internet, or by telephone, as provided on each proxy card) for both your shares of BFS common stock and your shares of BMC common stock.

 

Q:

How can I vote my shares in person at my respective stockholder meeting?

 

A:

Record holders. Shares held directly in your name as the stockholder of record of Builders FirstSource or BMC may be voted in person at the BFS stockholder meeting or the BMC stockholder meeting, as applicable, or any adjournment or postponement thereof. If you choose to vote your shares in person at the respective stockholder meeting, please bring your enclosed proxy card and current, government-issued photo identification.

Shares in “street name.Shares held in “street name” may be voted in person by you only if you obtain a signed legal proxy from your bank, broker, or other nominee giving you the right to vote the shares, and you bring the signed legal proxy to the applicable stockholder meeting. If you choose to vote your shares in person at the BFS stockholder meeting or BMC stockholder meeting, as applicable, or any adjournment or postponement thereof, please bring current, government-issued photo identification.

Even if you plan to attend the BFS stockholder meeting or the BMC stockholder meeting, as applicable, Builders FirstSource and BMC recommend that you submit a proxy to vote your shares in advance as described below so that your vote will be counted if you later decide not to, or become unable to, attend the applicable stockholder meeting. The use of video, still photography, or audio recording at either of the stockholder meetings is not permitted. For the safety of attendees, all bags, packages, and briefcases are subject to inspection.

 

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In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, either the BFS board of directors or the BMC board of directors determines to hold the BFS stockholder meeting or the BMC stockholder meeting virtually in addition to, or in lieu of, holding the applicable stockholder meeting in person, Builders FirstSource or BMC, as applicable, will announce that fact as promptly as practicable after making such determination, and details on how to participate will be made available in the press release announcing such determination and will also be posted on the applicable company’s website at http://investors.bldr.com/press-releases or ir.buildwithbmc.com, respectively.

Additional information on attending the stockholder meetings can be found under the sections entitled “The BFS Stockholder Meeting” and “The BMC Stockholder Meeting” beginning on pages 59 and 69, respectively.

 

Q:

How can I vote my shares without attending my respective stockholder meeting?

 

A:

Whether you hold your shares directly as the stockholder of record of Builders FirstSource or BMC or beneficially in “street name,” you may direct your vote by proxy without attending the BFS stockholder meeting or the BMC stockholder meeting, as applicable. You can vote by proxy over the Internet, by telephone, or by mail by following the instructions provided in the enclosed proxy card. Please note that if you hold shares beneficially in “street name,” you should follow the voting instructions provided by your bank, broker, or other nominee.

Additional information on voting procedures can be found under the sections entitled “The BFS Stockholder Meeting” and “The BMC Stockholder Meeting” beginning on pages 59 and 69, respectively.

 

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in “street name?”

 

A:

If your shares of common stock in Builders FirstSource or BMC are registered directly in your name with Computershare Trust Company, N.A., which is referred to as Computershare and is the transfer agent for both Builders FirstSource and BMC, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote, or to grant a proxy for your vote, directly to Builders FirstSource or BMC, as applicable, or to a third party, to vote at the respective stockholder meeting.

If your shares of common stock in Builders FirstSource or BMC are held by a bank, broker, or other nominee, you are considered the beneficial owner of shares held in “street name,” and your bank, broker, or other nominee is considered the stockholder of record with respect to those shares. Your bank, broker, or other nominee will provide you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. You are invited to attend the BFS stockholder meeting or the BMC stockholder meeting, as applicable; however, you may not vote these shares in person at the respective stockholder meeting unless you obtain a signed legal proxy, executed in your favor, from your bank, broker, or other nominee that holds your shares, giving you the right to vote the shares in person at the applicable stockholder meeting, and you bring the signed legal proxy to the applicable stockholder meeting.

 

Q:

If my shares of BFS common stock or BMC common stock are held in “street name” by my bank, broker, or other nominee, will my bank, broker, or other nominee automatically vote those shares for me?

 

A:

No. Your bank, broker, or other nominee will only be permitted to vote your shares of BFS common stock or BMC common stock, as applicable, if you instruct your bank, broker, or other nominee how to vote. You should follow the procedures provided by your bank, broker, or other nominee regarding the voting of your

 

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  shares. Banks, brokers, and other nominees who hold shares of BFS common stock or BMC common stock in “street name” for their customers have authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers, and other nominees are prohibited from exercising their voting discretion with respect to non-routine matters, which includes all the proposals currently scheduled to be considered and voted on at each of the BFS stockholder meeting and BMC stockholder meeting. As a result, absent specific instructions from the beneficial owner of such shares, banks, brokers, and other nominees are not empowered to vote such shares.

For BFS stockholders, the effect of not instructing your bank, broker, or other nominee how you wish to vote your shares will be the same as a vote “AGAINST” the BFS charter amendment proposal, but will not be counted as “FOR” or “AGAINST” and will have no effect on the BFS share issuance proposal (assuming a quorum is present at the BFS stockholder meeting) or the BFS adjournment proposal.

For BMC stockholders, the effect of not instructing your bank, broker, or other nominee how you wish to vote your shares will be the same as a vote “AGAINST” the BMC merger agreement proposal, but will not be counted as “FOR” or “AGAINST” the BMC compensation proposal or the BMC adjournment proposal and, assuming a quorum is present at the BMC stockholder meeting, will have no effect on the BMC compensation proposal or the BMC adjournment proposal.

 

Q:

What should I do if I receive more than one set of voting materials for the same stockholder meeting?

 

A:

If you hold shares of BFS common stock or BMC common stock in “street name” and also directly in your name as a stockholder of record or otherwise, or if you hold shares of BFS common stock or BMC common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the same stockholder meeting. You should vote all sets of voting materials you receive.

Record holders. For shares held directly, please complete, sign, date, and return each proxy card (or cast your vote over the Internet or by telephone, as provided on each proxy card), or otherwise follow the voting instructions provided in this joint proxy statement/prospectus in order to ensure that all of your shares of BFS common stock or BMC common stock are voted.

Shares in “street name.For shares held in “street name” through a bank, broker, or other nominee, you should follow the procedures provided by each applicable bank, broker, or other nominee to vote your shares held in “street name” by such bank, broker, or other nominee.

 

Q:

If a stockholder gives a proxy, how are the shares of Builders FirstSource or BMC common stock voted?

 

A:

Regardless of the method you choose to vote, the individuals named on the enclosed proxy card will vote your shares of BFS common stock or BMC common stock, as applicable, in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of BFS common stock or BMC common stock, as applicable, should be voted for or against, or abstain from voting on, all, some, or none of the specific items of business to come before the applicable stockholder meeting.

 

Q:

How will my shares of BFS common stock be voted if I return a blank proxy?

 

A:

If you are a stockholder of record and you sign, date, and return your proxy but do not indicate how you want your shares of BFS common stock to be voted, then your shares of BFS common stock will be voted “FOR” the BFS share issuance proposal, “FOR” the BFS charter amendment proposal, and “FOR” the BFS adjournment proposal.

 

Q:

How will my shares of BMC common stock be voted if I return a blank proxy?

 

A:

If you are a stockholder of record and you sign, date, and return your proxy but do not indicate how you want your shares of BMC common stock to be voted, then your shares of BMC common stock will be voted

 

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  FOR” the BMC merger agreement proposal, “FOR” the BMC compensation proposal, and “FOR” the BMC adjournment proposal.

 

Q:

Can I change my vote after I have submitted my proxy?

 

A:

Yes. You may revoke your proxy or change your vote before your proxy is voted at the applicable stockholder meeting. Any stockholder giving a proxy has the right to revoke such proxy before it is voted at the applicable stockholder meeting by doing any of the following:

 

   

subsequently submitting a new proxy (including by submitting a proxy via the Internet or telephone) at a later date than your original proxy so that the new proxy is received by the deadline specified on the accompanying proxy card;

 

   

sending to Builders FirstSource’s corporate secretary or BMC’s corporate secretary, as applicable, a signed written notice, bearing a later date than your original proxy, that you revoke your proxy and mailing it so that it is received prior to the BFS stockholder meeting or the BMC stockholder meeting; or

 

   

voting in person at the applicable stockholder meeting, which will automatically cancel any proxy previously given, or revoking your proxy in person at the applicable stockholder meeting.

Execution or revocation of a proxy will not in any way affect your right to attend the applicable stockholder meeting and vote in person. Attending the applicable stockholder meeting will not, by itself, revoke a proxy. Written notices of revocation and other communications with respect to the revocation of proxies should be addressed:

 

if you are a BFS stockholder, to:    if you are a BMC stockholder, to:

Builders FirstSource, Inc.

Attention: Corporate Secretary

2001 Bryan Street, Suite 1600

Dallas, Texas 75201

  

BMC Stock Holdings, Inc.

Attention: Corporate Secretary

4800 Falls of Neuse Road, Suite 400

Raleigh, North Carolina 27609

 

Q:

If I hold my shares in “street name,” can I change my voting instructions after I have submitted voting instructions to my bank, broker, or other nominee?

If your shares are held in the name of a bank, broker, or other nominee and you previously provided voting instructions to your bank, broker, or other nominee, you should follow the instructions provided by your bank, broker, or other nominee to revoke or change your voting instructions.

 

Q:

Where can I find the voting results of the stockholder meetings?

 

A:

The preliminary voting results for each stockholder meeting will be announced at that stockholder meeting. In addition, within four business days after completion of its respective stockholder meeting, each of Builders FirstSource and BMC intends to file the final voting results of its respective stockholder meeting with the SEC on a Current Report on Form 8-K.

 

Q:

If I do not favor the merger, what are my rights?

 

A:

Neither BFS stockholders nor BMC stockholders are entitled to dissenters’ or appraisal rights under the DGCL or otherwise. If they are not in favor of the merger, BFS stockholders may vote against the BFS share issuance proposal and/or the BFS charter amendment proposal, and BMC stockholders may vote against the BMC merger agreement proposal. For more information, please see the section entitled “No Appraisal Rights” beginning on page 203. Information about how BFS stockholders may vote on the

 

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  proposals being considered in connection with the merger can be found under the section entitled “The BFS Stockholder Meeting” beginning on page 59. Information about how BMC stockholders may vote on the proposals being considered in connection with the merger can be found under the section entitled “The BMC Stockholder Meeting” beginning on page 69.

 

Q:

Are there any risks that I should consider in deciding whether to vote in favor of the BMC merger agreement proposal, the BFS share issuance proposal, or the BFS charter amendment proposal?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 43. You also should read and carefully consider the risk factors of Builders FirstSource and BMC contained in the documents that are incorporated by reference into this joint proxy statement/prospectus.

 

Q:

What happens if I sell my shares of BFS common stock or BMC common stock before the respective stockholder meeting?

 

A:

The BFS record date is earlier than the date of the BFS stockholder meeting, and the BMC record date is earlier than the date of the BMC stockholder meeting. If you transfer your shares of BFS common stock or BMC common stock after the respective record date, but before the applicable stockholder meeting, you will, unless special arrangements are made, retain your right to vote at the applicable stockholder meeting. However, in the case of BMC stockholders, if you transfer your shares prior to completion of the merger, you will not have the right to receive the merger consideration. In order to receive the merger consideration, you must continue to hold your shares of BMC common stock immediately prior to completion of the merger.

 

Q:

What will happen to Builders FirstSource and BMC as a result of the merger?

 

A:

In the merger, Merger Sub, a wholly owned subsidiary of Builders FirstSource, will merge with and into BMC, with BMC surviving the merger as a wholly owned subsidiary of Builders FirstSource. As a result, upon completion of the merger, BMC will no longer be a public company and its shares will be delisted from Nasdaq, deregistered under the Exchange Act, and cease to be publicly traded.

 

Q:

What will I receive if the merger is completed?

 

A:

If the merger is completed, each outstanding share of BMC common stock (other than shares of BMC common stock owned of record or beneficially owned by Builders FirstSource, Merger Sub, or BMC (including shares held as treasury stock or otherwise) immediately prior to the effective time, which shares are referred to as canceled shares) will be converted into the right to receive 1.3125 shares of BFS common stock, which ratio is referred to as the exchange ratio, and which amount of BFS common stock is referred to as the merger consideration. No fractional shares of BFS common stock will be issued upon the conversion of shares of BMC common stock pursuant to the merger agreement. Rather, each BMC stockholder that otherwise would have been entitled to receive a fraction of a share of BFS common stock will be entitled to receive cash in lieu of such fractional share. BMC stockholders may also be entitled to receive dividends or other distributions payable with respect to the shares of BFS common stock they are entitled to receive pursuant to the exchange ratio, if applicable.

If the merger is completed, BFS stockholders will not receive any merger consideration and will continue to own their existing shares of BFS common stock.

 

Q:

What is the value of the merger consideration?

Builders FirstSource will issue a fixed number of shares of BFS common stock in exchange for each share of BMC common stock. As a result, the implied value of the merger consideration to be received by BMC

 

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stockholders will fluctuate based on any changes in the market price of BFS common stock prior to the completion of the merger. Accordingly, such implied value of the per share merger consideration to be received by BMC stockholders upon completion of the merger could be greater than, less than, or the same as the implied value of the merger consideration on the date of this joint proxy statement/prospectus. We urge you to obtain current market quotations for the shares of BFS common stock and BMC common stock. BFS common stock and BMC common stock are listed on Nasdaq under the symbols “BLDR” and “BMCH,” respectively.

For more information on the exchange ratio and the merger consideration, please see the sections entitled “The Merger—Exchange Ratio” and “The Merger Agreement—Merger Consideration” beginning on pages 79 and 137, respectively.

 

Q:

If I am a BMC stockholder, where will the BFS common stock that I receive in the merger be publicly traded?

 

A:

The shares of BFS common stock to be issued in the merger will be listed for trading on Nasdaq.

 

Q:

If I am a BMC stockholder, how will I receive the merger consideration to which I am entitled?

 

A:

If you hold your shares of BMC common stock in book-entry form, you will not be required to take any specific actions to exchange your shares for shares of BFS common stock. Upon the completion of the merger, shares of BMC common stock held in book-entry form will be automatically exchanged for the appropriate number of shares of BFS common stock in book-entry form, together with any cash in lieu of fractional shares and any unpaid dividends and distributions, in accordance with the merger agreement. If you hold your shares of BMC common stock in certificated form, after receiving the proper documentation from you, following the effective time, the exchange agent will deliver to you the appropriate number of shares of BFS common stock in book-entry form, together with any cash in lieu of fractional shares and any unpaid dividends and distributions, in accordance with the merger agreement. More information may be found in the sections entitled “The Merger—Exchange of Shares” and “The Merger Agreement—Exchange of BMC Stock Certificates and Book-Entry Shares” beginning on pages 133 and 138, respectively.

 

Q:

What will happen to the Builders FirstSource equity compensation plans? Will Builders FirstSource equity awards be affected by the merger?

 

A:

The merger will not constitute a change in control for purposes of the Builders FirstSource 1998 Stock Incentive Plan, 2005 Equity Incentive Plan, 2007 Incentive Plan, or 2014 Incentive Plan, each, as amended, which are collectively referred to as the BFS Stock Plans. The BFS Stock Plans will remain in effect in accordance with their terms, and Builders FirstSource equity awards will remain outstanding as equity awards relating to shares of BFS common stock and will not be affected by the merger.

 

Q:

Will BMC equity awards be affected by the merger?

 

A:

At the effective time:

 

   

each outstanding BMC stock option held by an individual who is an employee or service provider of BMC immediately prior to the effective time will become an option to purchase shares of BFS common stock, with the number of shares and the exercise price adjusted by the exchange ratio;

 

   

each outstanding BMC stock option held by an individual who is not an employee or service provider of BMC immediately prior to the effective time will be converted into the right to receive cash in an amount equal to the product of (i) the number of shares of BMC common stock subject to such BMC stock option as of immediately prior to the effective time and (ii) the excess of (a) the average closing market value of 1.3125 shares of BFS common stock for the 10 trading days prior to the closing over (b) the applicable exercise price per share of such option, subject to applicable withholding taxes; and

 

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except as may otherwise be agreed upon between Builders FirstSource and any holder thereof, each outstanding BMC time-vested restricted stock unit, which are referred to as BMC RSUs, and BMC performance-vested restricted stock unit, which are referred to as BMC PSUs, will vest and settle in a number of shares of BFS common stock equal to the number of shares of BMC common stock otherwise issuable upon settlement of such BMC RSU or BMC PSU (assuming vesting at target level of performance for BMC PSUs), multiplied by the exchange ratio, and subject to applicable withholding taxes.

For more information, please see the information provided in the section entitled “Interests of BMC’s Directors and Executive Officers in the Merger” beginning on page 178.

 

Q:

What will happen to the BMC equity compensation plans?

 

A:

At the effective time, Builders FirstSource will assume the Stock Building Supply, Inc. 2013 Incentive Compensation Plan and the BMC 2020 Incentive Compensation Plan, which are collectively referred to as the BMC Stock Plans, and will be entitled to grant awards under the BMC Stock Plans following the effective time to (i) individuals who were employed by or performing services for BMC and its subsidiaries immediately prior to the effective time and (ii) individuals who are hired by or begin performing services for Builders FirstSource and its subsidiaries following the effective time, in each case, using the shares authorized and available (or that may again become available) for issuance under the BMC Stock Plans as of the effective time, subject to any limitations under applicable law or any applicable securities exchange listing requirements, except that: (i) shares covered by such awards shall be shares of BFS common stock; (ii) all references in the BMC Stock Plans to a number of shares of BMC common stock will be deemed amended to refer instead to a number of shares of BFS common stock determined by multiplying the number of referenced shares of BMC common stock by the exchange ratio, and rounding the resulting number down to the nearest whole number of shares of BFS common stock; (iii) the compensation committee of the BFS board of directors will succeed the authority and responsibility of the BMC board of directors or any committee thereof with respect to the administration of the BMC Stock Plans; and (iv) the BMC Stock Plans will be subject to administrative procedures consistent with those in effect under Builders FirstSource’s equity compensation plans. In addition, at the effective time, Builders FirstSource will assume all obligations of BMC under the BMC Stock Plans with respect to each assumed stock option, subject to certain required adjustments and the award agreements evidencing the grant of such BMC stock options to be converted into assumed stock options.

 

Q:

What are the material United States federal income tax consequences of the merger to BMC stockholders?

 

A:

BMC stockholders are not expected to recognize any gain or loss for U.S. federal income tax purposes as a result of the merger, except for any gain or loss attributable to the receipt of cash in lieu of a fractional share of BFS common stock. A more detailed discussion of the material U.S. federal income tax consequences of the merger can be found in the section entitled “Material United States Federal Income Tax Consequences” beginning on page 186.

The tax consequences of the transactions to any particular BMC stockholder will depend on that stockholder’s particular facts and circumstances. Accordingly, you are urged to consult your tax advisor to determine your tax consequences from the merger.

 

Q:

When is the merger expected to be completed?

 

A:

Subject to the satisfaction or waiver of the conditions to the completion of the merger described under the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 152, including the approval of the BFS share issuance and adoption of the BFS charter amendment by BFS stockholders at the BFS stockholder meeting (or any adjournment or postponement thereof) and the

 

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  adoption of the merger agreement by BMC stockholders at the BMC stockholder meeting (or any adjournment or postponement thereof), the merger is expected to close in late 2020 or early 2021. However, neither Builders FirstSource nor BMC can predict the actual date on which the merger will be completed, or if the merger will be completed at all, because completion is subject to customary closing conditions, some of which are outside the control of both companies. Please see also the section entitled “The Merger—Regulatory Approvals” beginning on page 130.

 

Q:

What are the conditions to the completion of the merger?

 

A:

In addition to the approval of the BFS share issuance and the adoption of the BFS charter amendment by the holders of BFS common stock and the adoption of the merger agreement by the holders of BMC common stock, completion of the merger is subject to the satisfaction (or waiver to the extent legally permissible) by each party of a number of additional conditions, including:

 

   

approval for listing on Nasdaq, subject to official notice of issuance, of the shares of BFS common stock to be issued in the BFS share issuance;

 

   

the absence of any law or order (whether preliminary, temporary or permanent) enacted or promulgated and remaining in effect that enjoins, prevents, makes illegal, or prohibits the completion of the merger or the BFS stock issuance;

 

   

the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part and the absence of a stop order or proceedings seeking a stop order by the SEC;

 

   

expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the HSR Act, applicable to the transactions contemplated by the merger agreement;

 

   

the effectiveness of the BFS charter amendment;

 

   

the accuracy of the other party’s representations and warranties made in the merger agreement, subject to the materiality standards in the merger agreement;

 

   

the performance, in all material respects, of all of the other party’s obligations under the merger agreement required to be performed at or prior to the completion of the merger and the compliance, in all material respects, by the other party with all of the covenants and conditions required to be complied with by such other party at or prior to the completion of the merger;

 

   

since the date of the merger agreement there must not have occurred and be continuing with respect to the other party any material adverse effect or any event, change, effect, development, or occurrence that would reasonably be expected to result in, individually or in the aggregate, a material adverse effect on such other party;

 

   

such party must have received a certificate executed by an executive officer of the other party certifying as to the satisfaction of the conditions in the three preceding bullets regarding representations and warranties, the performance of covenants, and the absence of any material adverse effect; and

 

   

such party must have received a written legal opinion of such party’s counsel or another nationally recognized law firm to the effect that for U.S. federal income tax purposes the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which is referred to as the Code.

No assurance can be given that the required consents and approvals will be obtained or that the required conditions to the completion of the merger will be satisfied. Even if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of such consents and approvals. Any delay in completing the merger could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that Builders FirstSource and BMC expect

 

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to achieve if the merger is successfully completed within its expected time frame. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, please see the sections entitled “The Merger Agreement—Conditions to the Completion of the Merger” and “The Merger—Regulatory Approvals” beginning on pages 152 and 130, respectively.

 

Q:

What happens if the merger is not completed?

 

A:

If the merger agreement is not adopted by BMC stockholders, if the BFS share issuance is not approved by BFS stockholders, if the BFS charter amendment is not adopted by BFS stockholders, or if the merger is not completed for any other reason, BMC stockholders will not receive any merger consideration for their shares of BMC common stock in connection with the merger. Instead, BMC will remain an independent public company and its common stock will continue to be listed on Nasdaq, and Builders FirstSource will not complete the BFS share issuance or the BFS charter amendment. If the merger agreement is terminated under specified circumstances, BMC may be required to pay Builders FirstSource a termination fee of $66 million. If the merger agreement is terminated under other specified circumstances, Builders FirstSource may be required to pay BMC a termination fee of $100 million. Please see the section entitled “The Merger Agreement—Termination Fees” beginning on page 156 for a more detailed discussion of these termination fees.

 

Q:

What respective equity stakes will BFS stockholders and BMC stockholders hold in the combined company immediately following the merger?

 

A:

Immediately following completion of the merger, holders of shares of BFS common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 57% of the issued and outstanding shares of BFS common stock, and holders of shares of BMC common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 43% of the issued and outstanding shares of BFS common stock, on a fully diluted basis and based on the number of shares of BFS common stock and BMC common stock outstanding as of November 13, 2020. The exact equity stake of BFS stockholders and BMC stockholders in the combined company immediately following the merger will depend on the number of shares of BFS common stock and BMC common stock issued and outstanding immediately prior to the merger.

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

Builders FirstSource has engaged Morrow Sodali LLC, which is referred to as Morrow Sodali, to assist in the solicitation of proxies for the BFS stockholder meeting. BFS estimates that it will pay Morrow Sodali a fee of approximately $15,000, plus reasonable expenses. Builders FirstSource has agreed to indemnify Morrow Sodali against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions). BMC has engaged Innisfree M&A Incorporated, which is referred to as Innisfree, to assist in the solicitation of proxies for the BMC stockholder meeting. BMC estimates that it will pay Innisfree a fee of approximately $25,000, plus reasonable expenses. BMC has agreed to indemnify Innisfree against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions). Builders FirstSource and BMC also may be required to reimburse banks, brokers, and other nominees for their expenses in forwarding proxy materials to beneficial owners of BFS common stock and BMC common stock, respectively. Builders FirstSource’s directors, officers, and employees and BMC’s directors, officers, and employees also may solicit proxies by mail, by telephone, by electronic means, or in person, but they will not be paid any additional amounts for such soliciting of proxies.

 

Q:

What should I do now?

 

A:

You should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes to and documents incorporated by reference into this joint proxy statement/prospectus, and return your

 

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  completed, signed, and dated proxy card(s) by mail in the enclosed postage-paid envelope(s) or submit your voting instructions by telephone or over the Internet as soon as possible so that your shares will be voted in accordance with your instructions. If your shares are held in the name of a bank, broker, or other nominee, please follow the instructions on the enclosed voting instruction form furnished by such bank, broker, or other nominee.

 

Q:

Whom do I call if I have questions about the BFS stockholder meeting, the BMC stockholder meeting, or the merger?

 

A:

If you have questions about the BFS stockholder meeting, the BMC stockholder meeting, or the merger, or desire additional copies of this joint proxy statement/prospectus or additional proxies, you may contact:

 

if you are a BFS stockholder:

Morrow Sodali LLC

509 Madison Avenue, Suite 1206
New York, New York 10022

Stockholders may call toll-free: (800) 662-5200

  

if you are a BMC stockholder:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders may call toll-free: (877) 750-8166

Banks and brokers may call collect: (212) 750-5833

 

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SUMMARY

For your convenience, provided below is a brief summary of certain information contained in this joint proxy statement/prospectus. This summary highlights selected information from this joint proxy statement/prospectus and does not contain all of the information that may be important to you as a BFS stockholder or a BMC stockholder. To understand the merger fully and for a more complete description of the terms of the merger, you should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes to and documents incorporated by reference into this joint proxy statement/prospectus. Items in this summary include a page reference directing you to a more complete description of those items. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 213.

The Parties to the Merger (Page 57)

Builders FirstSource, Inc.

Builders FirstSource, Inc., a Delaware corporation, is the largest U.S. supplier of building products, prefabricated components, and value-added services to the professional market segment for new residential construction and repair and remodeling. Builders FirstSource provides customers an integrated homebuilding solution, offering manufacturing, supply, delivery, and installation of a full range of structural and related building products. Builders FirstSource operates in 40 states with approximately 400 locations, and has a market presence in 77 of the top 100 metropolitan statistical areas, providing geographic diversity and balanced end-market exposure. Builders FirstSource services customers from strategically located distribution and manufacturing facilities that produce value-added products such as roof and floor trusses, wall panels, stairs, vinyl windows, custom millwork, and pre-hung doors. It also distributes dimensional lumber and lumber sheet goods, millwork, windows, interiors and exterior doors, and other building products. Builders FirstSource’s principal executive offices are located at 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, and its telephone number is (214) 880-3500.

BMC Stock Holdings, Inc.

BMC Stock Holdings, Inc., a Delaware corporation, is a leading provider of diversified building materials and solutions to new construction builders and professional remodelers in the U.S. BMC’s comprehensive portfolio of products and services spans building materials, including millwork and structural component manufacturing capabilities, consultative showrooms and design centers, value-added installation management, and an innovative eBusiness platform. BMC serves 45 metropolitan areas across 18 states, principally in the South and West regions. BMC’s principal executive office is located at 4800 Falls of Neuse Road, Suite 400, Raleigh, North Carolina 27609, and its telephone number is (919) 431-1000.

Boston Merger Sub I Inc.

Boston Merger Sub I Inc., a Delaware corporation and a wholly owned subsidiary of Builders FirstSource, was formed solely for the purpose of facilitating the merger. Merger Sub has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the merger and the other transactions contemplated by the merger agreement. By operation of the merger, Merger Sub will be merged with and into BMC, with BMC surviving the merger as a wholly owned subsidiary of Builders FirstSource. Merger Sub’s principal executive offices are located at c/o Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, and its telephone number is (214) 880-3500.



 

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The BFS Stockholder Meeting (Page 59)

The BFS stockholder meeting is scheduled to be held at the corporate headquarters of Builders FirstSource, located at 2001 Bryan Street, Suite 1600, Dallas, Texas on December 22, 2020, beginning at 9:00 a.m., Central Time. In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, the BFS board of directors determines to hold the BFS stockholder meeting virtually in addition to, or in lieu of, holding the BFS stockholder meeting in person, Builders FirstSource will announce that fact as promptly as practicable after making such determination, and details on how to participate will be made available in the press release announcing such determination and will also be posted on the Builders FirstSource website at http://investors.bldr.com/press-releases.

The purposes of the BFS stockholder meeting are as follows:

 

   

BFS share issuance proposal. To approve the issuance of shares of BFS common stock to the stockholders of BMC pursuant to the merger agreement.

 

   

BFS charter amendment proposal. To adopt an amendment to the BFS charter to increase the number of authorized shares of BFS common stock.

 

   

BFS adjournment proposal. To approve the adjournment of the BFS stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BFS stockholder meeting, there are not sufficient votes to approve the BFS share issuance proposal or the BFS charter amendment proposal, or if Builders FirstSource is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to BFS stockholders.

Completion of the merger is conditioned on the approval of the BFS share issuance and adoption of the BFS charter amendment by the BFS stockholders.

Only holders of record of issued and outstanding shares of BFS common stock at the close of business on November 13, 2020, the BFS record date, are entitled to notice of, and to vote at, the BFS stockholder meeting (or any adjournment or postponement thereof). For any matter properly brought before the BFS stockholder meeting, BFS stockholders may cast one vote for each share of BFS common stock owned at the close of business on the BFS record date.

The BFS share issuance proposal requires the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting (or any adjournment or postponement thereof), assuming a quorum is present. An abstention (either by attending the BFS stockholder meeting in person and abstaining from voting or responding by proxy with an “abstention” vote) will have the same effect as a vote “AGAINST” the BFS share issuance proposal, while a broker non-vote, if any, or other failure of a BFS stockholder who does not attend the BFS stockholder meeting in person to vote will have no effect on the outcome of the BFS share issuance proposal, assuming a quorum is present.

The BFS charter amendment proposal requires the affirmative vote of a majority of the outstanding shares of BFS common stock entitled to vote on such proposal. An abstention, a broker non-vote, if any, or any other failure to vote will have the same effect as a vote “AGAINST” the BFS charter amendment proposal.

Whether or not there is a quorum, the approval of the BFS adjournment proposal requires the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting (or any adjournment or postponement thereof). An abstention (either by attending the BFS stockholder meeting in person and abstaining from voting or responding by proxy with an “abstention” vote) will have the same effect as a vote “AGAINST



 

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the BFS adjournment proposal, while a broker non-vote, if any, or other failure of a BFS stockholder who does not attend the BFS stockholder meeting in person to vote will have no effect on the outcome of the BFS adjournment proposal.

Information about how BFS stockholders may vote on the proposals solicited in connection with the merger can be found under the section entitled “The BFS Stockholder Meeting” beginning on page 59.

The BMC Stockholder Meeting (Page 69)

The BMC stockholder meeting is scheduled to be held at the Embassy Suites, 8001 Arco Corporate Drive, Raleigh, North Carolina 27617 on December 22, 2020, beginning at 10:00 a.m., Eastern Time. In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, the BMC board of directors determines to hold the BMC stockholder meeting virtually in addition to, or in lieu of, holding the BMC stockholder meeting in person, BMC will announce that fact as promptly as practicable after making this determination, and details on how to participate will be made available in the press release announcing such determination and will also be posted on the BMC website at ir.buildwithbmc.com.

The purposes of the BMC stockholder meeting are as follows:

 

   

BMC merger agreement proposal. To adopt the merger agreement.

 

   

BMC compensation proposal. To approve, on an advisory (non-binding) basis, the BMC compensation proposal.

 

   

BMC adjournment proposal. To approve the adjournment of the BMC stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BMC stockholder meeting, there are not sufficient votes to approve the BMC merger agreement proposal, or if BMC is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to BMC stockholders.

Completion of the merger is conditioned on the adoption of the merger agreement by the BMC stockholders.

Only holders of record of issued and outstanding shares of BMC common stock at the close of business on November 13, 2020, the BMC record date, are entitled to notice of, and to vote at, the BMC stockholder meeting (or any adjournment or postponement thereof). For any matter properly brought before the BMC stockholder meeting, BMC stockholders may cast one vote for each share of BMC common stock owned at the close of business on the BMC record date.

The BMC merger agreement proposal requires the affirmative vote of a majority of the outstanding shares of BMC common stock entitled to vote on such proposal. An abstention, a broker non-vote, if any, or any other failure to vote will have the same effect as a vote “AGAINST” the BMC merger agreement proposal.

The BMC compensation proposal requires the affirmative vote of the holders of a majority of shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting (or any adjournment or postponement thereof) and entitled to vote on the proposal. An abstention will have the same effect as a vote “AGAINST” the BMC compensation proposal, while a broker non-vote, if any, or other failure to vote will have no effect on the vote on the BMC compensation proposal, assuming a quorum is present.

The approval of the BMC adjournment proposal requires the affirmative vote of the holders of a majority of the shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting (or any adjournment or postponement thereof) and entitled to vote on the proposal. An abstention will have the same effect as a vote “AGAINST” the BMC adjournment proposal, while a broker non-vote, if any, or other failure to vote will have no effect on the outcome of the BMC adjournment proposal, assuming a quorum is present.



 

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Information about how BMC stockholders may vote on the proposals solicited in connection with the merger can be found under the section entitled “The BMC Stockholder Meeting” beginning on page 69.

The Merger and the Merger Agreement (Pages 79 and 136, respectively)

The terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus. You are encouraged to read the merger agreement carefully and in its entirety, as it is the primary legal document that governs the merger.

Pursuant to the merger agreement, Merger Sub will merge with and into BMC. As a result of the merger, the separate existence of Merger Sub will cease, and BMC will continue its existence under the laws of the State of Delaware as the surviving corporation and a wholly owned subsidiary of Builders FirstSource. Following the merger, BMC common stock will be delisted from Nasdaq, will be deregistered under the Exchange Act, and will cease to be publicly traded.

Exchange Ratio; Merger Consideration (Pages 79 and 137)

At the effective time, each share of BMC common stock (other than canceled shares) will be converted into the right to receive 1.3125 shares of BFS common stock, which ratio is referred to as the exchange ratio, and which amount of BFS common stock is referred to as the merger consideration. The exchange ratio is fixed, which means that it will not change between now and the date of the merger, regardless of whether the market price of either the BFS common stock or the BMC common stock changes. No fractional shares of BFS common stock will be issued upon the conversion of shares of BMC common stock pursuant to the merger agreement. Following the effective time, the exchange agent will aggregate all fractional shares of BFS common stock that would otherwise have been required to be distributed pursuant to the merger agreement and cause them to be sold in round lots (to the extent practicable) on Nasdaq at the then-prevailing prices. Each holder of BMC common shares that otherwise would have been entitled to receive a fraction of a share of BFS common stock pursuant to the merger agreement will, in lieu thereof, be entitled to receive from the proceeds from such sales by the exchange agent, rounded to the nearest whole cent and without interest, an amount equal to such holder’s proportionate interest in the proceeds from such sales, based on the fractional shares of BFS common stock to which such holder would otherwise be entitled. BMC stockholders may also be entitled to receive dividends or other distributions payable with respect to the shares of BFS common stock they are entitled to receive pursuant to the exchange ratio, if applicable.

BFS stockholders will continue to own their existing shares, which will not be affected by the merger and which will constitute shares of the combined company following completion of the merger.

For more information on the exchange ratio and the merger consideration, please see the sections entitled “The Merger—Exchange Ratio” beginning on page 79 and “The Merger Agreement—Merger Consideration” beginning on page 137.

Treatment of Existing BMC Equity Awards (Page 139)

At the effective time:

 

   

each outstanding BMC stock option held by an individual who is an employee or service provider of BMC immediately prior to the effective time will become an option to purchase shares of BFS common stock, with the number of shares and the exercise price adjusted by the exchange ratio;

 

   

each outstanding BMC stock option held by an individual who is not an employee or service provider of BMC immediately prior to the effective time will be converted into the right to receive cash in an amount equal to the product of (i) the number of shares of BMC common stock subject to such BMC



 

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stock option as of immediately prior to the effective time and (ii) the excess of (a) the average closing market value of 1.3125 shares of BFS common stock for the 10 trading days prior to the completion of the merger over (b) the applicable exercise price per share of such option, subject to applicable withholding taxes; and

 

   

except as may otherwise be agreed upon between Builders FirstSource and any holder thereof, each outstanding BMC RSU and each BMC PSU will vest and settle in a number of shares of BFS common stock equal to the number of shares of BMC common stock otherwise issuable upon settlement of such BMC RSU or BMC PSU (assuming vesting at target level of performance for BMC PSUs), multiplied by the exchange ratio, and subject to applicable withholding taxes.

For more information, please see the sections entitled “The Merger Agreement—Treatment of Equity Awards” and “Interests of BMC’s Directors and Executive Officers in the Merger” beginning on pages 139 and 178, respectively.

Recommendation of the BFS Board of Directors; Builders FirstSources Reasons for the Merger (Page 99)

The BFS board of directors unanimously recommends that BFS stockholders vote “FOR” the BFS share issuance proposal (BFS Proposal 1), “FOR” the BFS charter amendment proposal (BFS Proposal 2), and “FOR” the BFS adjournment proposal (BFS Proposal 3).

The BFS board of directors unanimously authorized, approved and declared advisable the merger agreement and the completion of the merger, the BFS share issuance, and the other transactions contemplated thereby by the merger agreement; approved and adopted the BFS charter amendment, subject to approval of the BFS share issuance and adoption of the BFS charter amendment by BFS stockholders at the BFS stockholder meeting; and recommended that the BFS stockholders approve the BFS share issuance and adopt the BFS charter amendment. In reaching its decision to authorize, approve and declare advisable the merger agreement and the transactions contemplated thereby, including the BFS share issuance, to approve and adopt the BFS charter amendment, in each case, subject to approval thereof by BFS stockholders, and to recommend that BFS stockholders adopt the BFS charter amendment and approve the BFS share issuance on the terms and subject to the conditions set forth in the merger agreement, the BFS board of directors held a number of meetings, consulted with Builders FirstSource’s senior management and its outside legal advisor and outside financial advisors, and considered a number of factors it believed supported its decision to enter into the merger agreement, including, without limitation, those listed in the section entitled “The Merger—Recommendation of the BFS Board of Directors; Builders FirstSource’s Reasons for the Merger” beginning on page 99.

For more information, please see the section entitled “The Merger—Background of the Merger” beginning on page 79.

Recommendation of the BMC Board of Directors; BMCs Reasons for the Merger (Page 104)

The BMC board of directors unanimously recommends that BMC stockholders vote “FOR” the BMC merger agreement proposal (BMC Proposal 1), “FOR” the BMC compensation proposal (BMC Proposal 2), and “FOR” the BMC adjournment proposal (BMC Proposal 3).

The BMC board of directors unanimously approved and declared advisable the merger agreement and the consummation of the merger and the other transactions contemplated thereby and determined that the terms thereof, the merger and the other transactions contemplated thereby are fair to, and in the best interests of, BMC and its stockholders and recommended to the stockholders of BMC that they adopt the merger agreement. In reaching its decision to approve and declare advisable the merger agreement and the completion of the merger and the other transactions contemplated thereby, the BMC board of directors held



 

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a number of meetings, consulted with the BMC transaction committee, BMC’s management and representatives of BMC’s legal counsel and financial advisor, and considered the business, assets and liabilities, results of operations, financial performance, strategic direction and prospects of Builders FirstSource and BMC and other factors, including, without limitation, those listed in the section entitled “The Merger—Recommendation of the BMC Board of Directors; BMC’s Reasons for the Merger” beginning on page 104.

For more information, please see the section entitled “The Merger—Background of the Merger” beginning on page 79.

Opinion of Builders FirstSources Financial Advisor (Page 108 and Annex C)

On August 26, 2020, Rothschild & Co US Inc., which is referred to as Rothschild & Co, rendered its oral opinion to the BFS board of directors (which was subsequently confirmed in writing by delivery of Rothschild & Co’s written opinion addressed to the BFS board of directors dated the same date) to the effect that, as of such date and based upon and subject to the assumptions, qualifications, limitations, and other matters set forth in its written opinion, the exchange ratio in the merger pursuant to the merger agreement was fair, from a financial point of view, to Builders FirstSource.

Rothschild & Co’s opinion was provided for the benefit of the BFS board of directors, in its capacity as such, in connection with and for the purpose of its evaluation of the merger, and only addressed the fairness to Builders FirstSource, from a financial point of view, as of August 26, 2020, of the exchange ratio in the merger pursuant to the merger agreement. Rothschild & Co did not express any opinion as to Builders FirstSource’s underlying business decision to engage in the merger or the relative merits of the merger as compared to any alternative transaction. The summary of Rothschild & Co’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex C to this joint proxy statement/prospectus and which sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Rothschild & Co in preparing its opinion. Neither Rothschild & Co’s written opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and they do not constitute, a recommendation to any stockholder of Builders FirstSource or BMC (or any other security holder) as to how such stockholder (or other holder) should vote or act on any matter relating to the merger. Rothschild & Co’s opinion was given and spoke only as of the date thereof. Developments subsequent to the delivery of its opinion may affect its analyses and opinion, and the assumptions used in preparing them, and Rothschild & Co does not have any obligation to update, revise, or reaffirm its opinion.

Opinion of BMCs Financial Advisor (Page 117 and Annex D)

BMC retained Moelis & Company LLC, which is referred to as Moelis, to act as its financial advisor in connection with the merger. At the meeting of the BMC board of directors on August 26, 2020 to evaluate and approve the merger agreement and the transactions contemplated by the merger agreement, Moelis delivered an oral opinion, which was confirmed by delivery of a written opinion, dated August 26, 2020, addressed to the BMC board of directors as to the fairness, as of the date of the opinion and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, from a financial point of view, of the exchange ratio in the merger to the holders of BMC common stock.

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connection with the opinion, is attached as Annex D to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. Moelis’ opinion was provided for the use and benefit of the BMC board of directors (solely in its capacity as such) in its evaluation of the merger. Moelis’ opinion was limited solely to the fairness, from a financial point of view, of the exchange ratio to the holders of BMC common stock, and does not address BMC’s underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that might be available to BMC. Moelis’ opinion does not constitute a recommendation as to how any holder of securities of BMC or Builders FirstSource should vote or act with respect to the merger or any other matter.

Proxy Solicitation Costs (Pages 63 and 73)

Builders FirstSource and BMC are soliciting proxies to provide an opportunity to all BFS stockholders and BMC stockholders to vote on agenda items at the respective stockholder meetings, whether or not they are able to attend their respective stockholder meetings (or any adjournment or postponement thereof). Each of Builders FirstSource and BMC will bear its entire cost of soliciting proxies from its stockholders.

Builders FirstSource has retained Morrow Sodali to assist in the solicitation of BFS proxies, and BMC has retained Innisfree to assist in the solicitation of BMC proxies. Builders FirstSource and BMC also may be required to reimburse banks, brokers, and other nominees for expenses they incur in forwarding proxy materials to beneficial stockholders. In addition, Builders FirstSource’s and BMC’s respective directors, officers, and other employees may solicit proxies in person, by telephone, electronically, by mail, or by other means, and will not be specifically compensated for such solicitations.

For a description of the costs and expenses to Builders FirstSource and BMC of soliciting proxies, please see “The BFS Stockholder Meeting—Proxy Solicitation Costs” and “The BMC Stockholder Meeting—Proxy Solicitation Costs” on pages 63 and 73, respectively.

Governance of the Combined Company (Page 131, Annex A and Annex B)

The merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus, contains certain provisions relating to the governance of Builders FirstSource following completion of the merger.

Certificate of Incorporation

Subject to adoption of the BFS charter amendment by BFS stockholders, immediately prior to the effective time, the certificate of incorporation of Builders FirstSource will be amended by the BFS charter amendment and, as so amended, will be the certificate of incorporation of Builders FirstSource, until thereafter amended. The full text of the proposed BFS charter amendment is attached as Annex B to this joint proxy statement/prospectus.

Board of Directors

As of the effective time, the BFS board of directors will consist of 12 directors, to be comprised of:

 

   

seven directors designated by Builders FirstSource, consisting of Paul S. Levy and six other members of the BFS board of directors as of immediately prior to the effective time as shall be designated in writing by Builders FirstSource prior to the effective time; and

 

   

five directors designated by BMC, consisting of Mr. David E. Flitman and four other members of the BMC board of directors as of immediately prior to the effective time as shall be designated in writing by BMC prior to the effective time.



 

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Each of the BMC designees (other than Mr. Flitman) must meet the independence requirements of Nasdaq.

As of the date of this joint proxy statement/prospectus, other than Messrs. Levy and Flitman, the individuals to serve on the BFS board of directors at the effective time have not been determined.

The BMC designees will be appointed to serve, after the effective time, in one of the three classes of the BFS board of directors, such that each such class will consist of four directors, consisting of: (i) in the class of directors designated as Class I, which class has a term expiring in 2021, three of the Builders FirstSource designees and one of the BMC designees; (ii) in the class of directors designated as Class II, which class has a term expiring in 2022, two of the Builders FirstSource designees and two of the BMC designees; and (iii) in the class of directors designated as Class III, which class has a term expiring in 2023, two of the Builders FirstSource designees and two of the BMC designees. Prior to the effective time, Builders FirstSource and BMC will agree as to which of the Builders FirstSource designees and the BMC designees shall serve in each such class.

Chairman of the Board of Directors

Mr. Paul S. Levy will remain as the chairman of the BFS board of directors following the effective time.

Chief Executive Officer

For a period of 90 days after the effective time, the present chief executive officer of Builders FirstSource, Mr. M. Chad Crow, will continue to serve as the chief executive officer of Builders FirstSource. Following such 90 day period, Builders FirstSource will take all actions necessary or appropriate to appoint, or cause the appointment of, Mr. Flitman as the chief executive officer of Builders FirstSource, to serve in accordance with the certificate of incorporation and bylaws of Builders FirstSource, until the earliest to occur of his resignation, death, or removal in accordance with such organizational documents.

Chief Financial Officer

From and after the effective time, the present chief financial officer of Builders FirstSource, Mr. Peter M. Jackson, will continue to serve as the chief financial officer of Builders FirstSource, in accordance with the certificate of incorporation and bylaws of Builders FirstSource, until the earliest to occur of his resignation, death, or removal in accordance with such organizational documents.

Name; Nasdaq Trading Symbol

The name of Builders FirstSource and its Nasdaq trading symbol will not be amended, revised, changed, or otherwise affected in any respect as a result of the completion of the merger or the other transactions contemplated by the merger agreement and will continue as “Builders FirstSource, Inc.” and “BLDR,” respectively.

Headquarters; Other Locations

From and after the effective time, the headquarters of Builders FirstSource will be located in Dallas, Texas, and Builders FirstSource will establish functional corporate centers of excellence in Raleigh, North Carolina and Denver, Colorado.

Regulatory Approvals (Page 130)

Builders FirstSource and BMC have agreed to cooperate with each other and use, and will cause their respective subsidiaries to use, their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under the merger agreement and applicable law to complete the transactions contemplated by the merger agreement as soon as reasonably practicable, including preparing and filing as promptly as reasonably practicable all documentation to effect all necessary notices, reports, and other filings and to obtain as promptly as



 

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practicable all consents, registrations, approvals, permits, and authorizations necessary or advisable to be obtained from any third party or any governmental entity in order to complete such transactions.

The completion of the merger is subject to the receipt of certain governmental clearances or approvals, including:

 

   

the expiration or termination of any applicable waiting period, or any extension thereof, under the HSR Act;

 

   

the SEC’s declaring effective the registration statement of which this joint proxy statement/prospectus is a part and the absence of any stop order suspending the effectiveness of the registration statement or proceedings for such purpose pending before the SEC; and

 

   

approval of the BFS common stock to be issued in the BFS share issuance for listing on Nasdaq, subject to official notice of issuance prior to the completion of the merger.

Subject to certain conditions and exceptions, each of Builders FirstSource and BMC and their respective affiliates may be required to divest, license, hold separate, or otherwise dispose of, or allow any third party to utilize, or otherwise take any other action that may be required or requested by any competition authority with respect to, any portion of Builders FirstSource’s or BMC’s respective businesses or assets if reasonably necessary, proper or advisable to complete the merger.

For a description of the parties’ obligations with respect to regulatory approvals related to the merger, please see the sections entitled “The Merger—Regulatory Approvals” beginning on page 130 and “The Merger Agreement—Cooperation; Efforts to Complete” beginning on page 148.

Ownership of the Combined Company after the Merger (Page 131)

Immediately following completion of the merger, holders of shares of BFS common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 57% of the issued and outstanding shares of BFS common stock, and holders of shares of BMC common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 43% of the issued and outstanding shares of BFS common stock, on a fully diluted basis and based on the number of shares of BFS common stock and BMC common stock outstanding as of November 13, 2020.

No Solicitation of Acquisition Proposals (Page 144)

As set forth in greater detail in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144, each of Builders FirstSource and BMC has agreed to immediately cease any discussions or negotiations with any person that may have been ongoing prior to the date of the merger agreement with respect to any acquisition proposal. In addition, each of Builders FirstSource and BMC has agreed that it will not, and will cause each of its controlled affiliates and use reasonable best efforts to cause its representatives not to, directly or indirectly, solicit or otherwise take a number of actions with respect to acquisition proposals.

If, however, prior to the adoption of the merger agreement by the holders of BMC common stock, in the case of BMC, or the approval of the BFS share issuance and the adoption of the BFS charter amendment by the holders of BFS common stock, in the case of Builders FirstSource, BMC or Builders FirstSource receives a bona fide written alternative acquisition proposal made after the date of the merger agreement that does not result from a breach of such party’s non-solicitation obligations under the merger agreement, and if the BMC board of directors or the BFS board of directors, as applicable, determines in good faith (after consultation with outside legal counsel and a nationally recognized financial advisor) that such acquisition proposal is, or could reasonably be expected to lead to, a superior acquisition proposal, as



 

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described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144, then BMC or Builders FirstSource, as applicable, may take certain actions with respect to such alternative acquisition proposal.

Conditions to the Completion of the Merger (Page 152)

Conditions to the Obligations of Each Party to Complete the Merger

The obligations of each of Builders FirstSource, Merger Sub, and BMC to complete the merger are subject to the satisfaction (or waiver in writing by Builders FirstSource and BMC) of various conditions, including the following:

 

   

receipt of (i) the approval of the BFS share issuance and the adoption of the BFS charter amendment by the holders of BFS common stock and (ii) the adoption of the merger agreement by the holders of BMC common stock;

 

   

approval for listing on Nasdaq, subject to official notice of issuance, of the shares of BFS common stock to be issued in the BFS share issuance;

 

   

the absence of any law or order (whether preliminary, temporary, or permanent) enacted or promulgated and remaining in effect that enjoins, prevents, makes illegal, or prohibits the completion of the merger or the BFS stock issuance;

 

   

the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part and the absence of a stop order or proceedings seeking a stop order by the SEC;

 

   

expiration or termination of the waiting period under the HSR Act applicable to the transactions contemplated by the merger agreement; and

 

   

the effectiveness of the BFS charter amendment.

Conditions to the Obligations of each of Builders FirstSource and BMC to Complete the Merger

In addition, the obligations of each of Builders FirstSource and BMC to complete the merger are subject to the satisfaction (or waiver to the extent legally permissible) prior to the completion of the merger of the following conditions:

 

   

the accuracy of the other party’s representations and warranties as follows:

 

   

certain of the representations and warranties regarding organization, good standing, and qualification; organizational documents; capital structure; and brokers and finders must have been true and correct in all material respects as of the date of the merger agreement and as of the completion of the merger as if made on the completion (except to the extent that any such representation and warranty expressly speaks as of the date of the merger agreement or any other specific date, in which case such representation and warranty shall have been true and correct in all material respects as of such date);

 

   

the representations and warranties of such party regarding the absence of any event, change, effect, development, condition, circumstance, or occurrence that would reasonably be expected to result in, individually or in the aggregate, a material adverse effect on such party shall be true and correct in all respects as of the date of the merger agreement and as of the completion of the merger as if made on the completion (except to the extent any such representation or warranty expressly speaks as of the date of the merger agreement or any other specific date, in which case such representation or warranty shall have been true and correct in all respects as of such date); and



 

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each other representation and warranty set forth in the merger agreement shall be true and correct in all respects as of the date of the merger agreement and as of the completion of the merger as if made on the completion (except to the extent any such representation or warranty expressly speaks as of the date of the merger agreement or any other specific date, in which case such representation or warranty shall have been true and correct as of such date), except for any failure of such representations and warranties to be so true and correct as would not reasonably be expected to result in, individually or in the aggregate, a material adverse effect;

 

   

the performance, in all material respects, of all of the other party’s obligations and agreements under the merger agreement required to be performed at or prior to the completion of the merger and the compliance, in all material respects, by the other party with all of the covenants and conditions required to becomplied with by such other party at or prior to the completion of the merger;

 

   

since the date of the merger agreement there must not have occurred and be continuing with respect to the other party any material adverse effect or any event, change, effect, development, or occurrence that would reasonably be expected to result in, individually or in the aggregate, a material adverse effect on such other party;

 

   

such party must have received a certificate executed by an executive officer of the other party certifying as to the satisfaction of the conditions in the three preceding bullets regarding representations and warranties, the performance of covenants, and the absence of any material adverse effect; and

 

   

such party must have received a written legal opinion of such party’s counsel or another nationally recognized law firm to the effect that for U.S. federal income tax purposes the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, please see the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 152.

Termination of the Merger Agreement (Page 154)

Termination by Mutual Consent

The merger agreement may be terminated at any time prior to the effective time by mutual written consent of Builders FirstSource and BMC.

Termination by either Builders FirstSource or BMC

Either Builders FirstSource or BMC may terminate the merger agreement at any time prior to the effective time if:

 

   

the completion of the merger has not occurred prior to 5:00 p.m., Eastern Time, on May 26, 2021, which is referred to as the outside date, except that, if, at 5:00 p.m., Eastern Time on the outside date, all of the conditions to the completion of the merger described in the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 152 have been satisfied or duly waived by all parties entitled to the benefit thereof (except for (i) conditions regarding (a) the existence of a legal restraint that relates to antitrust laws, or (b) expiration or termination of the waiting period under the HSR Act, and (ii) any other condition that by its nature is to be satisfied at the completion of the merger), then, subject to certain exceptions, the outside date will automatically be extended to August 26, 2021;

 

   

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the approval of the BFS share issuance and the adoption of the BFS charter amendment are not obtained at the special meeting of holders of BFS common stock (or at any adjournment or postponement thereof) at which a vote on the BFS share issuance was taken;

 

   

adoption of the merger agreement is not obtained at the special meeting of holders of BMC common stock (or at any adjournment or postponement thereof) at which a vote on the adoption of the merger agreement was taken; or

 

   

the other party breaches, or fails to perform or comply with, any of its covenants or agreements under the merger agreement, or any of such other party’s representations or warranties fails to be accurate, which failure (i) would give rise to the failure of a condition to the completion of the merger regarding the accuracy of such other party’s representations and warranties or such other party’s compliance with its covenants and agreements and (ii) is not reasonably capable of being cured by such other party by the outside date (as it may be extended) or, if reasonably capable of being cured by such other party by the outside date (as it may be extended), is not cured by such other party within thirty days after the terminating party delivers written notice of such failure to such other party, in each case, subject to certain exceptions.

Termination by Builders FirstSource

Builders FirstSource may terminate the merger agreement at any time prior to the adoption of the merger agreement by the holders of BMC common stock, if:

 

   

the BMC board of directors (or a committee thereof) has made a change of recommendation; or

 

   

BMC has breached any of its non-solicitation obligations described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144 in any material respect.

Termination by BMC

BMC may terminate the merger agreement at any time prior to the approval of the BFS share issuance and the adoption of the BFS charter amendment by the holders of BFS common stock, if:

 

   

the BFS board of directors (or a committee thereof) has made a change of recommendation; or

 

   

Builders FirstSource has breached any of its non-solicitation obligations described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144 in any material respect.

Termination Fees (Page 156)

Termination Fee payable to Builders FirstSource

BMC will be required to pay to Builders FirstSource a termination fee of $66 million if the merger agreement is terminated:

 

   

by Builders FirstSource, if, prior to the adoption of the merger agreement by the holders of BMC common stock, (i) the BMC board of directors (or a committee thereof) has made a change of recommendation or (ii) BMC has breached any of its non-solicitation obligations described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” on page 156 in any material respect; or

 

   

by either Builders FirstSource or BMC, if (i) the adoption of the merger agreement is not obtained at the special meeting of holders of BMC common stock (or at any adjournment or postponement thereof) or (ii) the merger agreement has been adopted by the holders of BMC common stock, but the



 

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completion of the merger has not occurred prior to the outside date (as it may be extended) and, in either case:

 

   

after the execution of this merger agreement and prior to BMC’s special meeting of stockholders, an acquisition proposal shall have been publicly disclosed and not withdrawn; and

 

   

within 12 months after such termination, any acquisition proposal is completed or BMC enters into a definitive agreement with respect to any acquisition proposal that is subsequently completed (with the references to “25%” in the definition of acquisition proposal described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144 being changed to “50%”).

Termination Fee payable to BMC

Builders FirstSource will be required to pay to BMC a termination fee of $100 million if the merger agreement is terminated:

 

   

by BMC, if, prior to the approval of the BFS share issuance and adoption of the BFS charter amendment by the holders of BFS common stock, (i) the BFS board of directors (or a committee thereof) has made a change of recommendation or (ii) Builders FirstSource has breached any of its non-solicitation obligations described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144 in any material respect; or

 

   

by either Builders FirstSource or BMC, if (i) the approval of the BFS share issuance and adoption of the BFS charter amendment are not obtained at the special meeting of holders of BFS common stock (or any adjournment or postponement thereof) or (ii) the BFS share issuance and BFS charter amendment been approved and adopted, respectively, by the holders of BFS common stock, but the completion of the merger has not occurred prior to the outside date (as it may be extended) and, in either case:

 

   

after the execution of this merger agreement and prior to Builders FirstSource’s special meeting of stockholders, an acquisition proposal shall have been publicly disclosed and not withdrawn; and

 

   

within 12 months after such termination, any acquisition proposal is completed or Builders FirstSource enters into a definitive agreement with respect to any acquisition proposal that is subsequently completed (with the references to “25%” in the definition of acquisition proposal described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144 being changed to “50%”).

If the merger agreement is terminated under circumstances in which Builders FirstSource or BMC must pay the other party a termination fee, such other party’s sole and exclusive remedy for any claims arising out of the merger agreement will be to receive payment of such termination fee, together with any costs and expenses incurred by such party in enforcing payment of such termination fee, except that the party that received such amounts may seek to recover money damages in excess of such amounts in the case of fraud. In no event will either party be required to pay a termination fee if such party has already paid a termination fee.

Material United States Federal Income Tax Consequences (Page 186)

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Provided that the merger qualifies as a “reorganization” under Section 368(a) of the Code, the material U.S. federal income tax consequences to U.S. holders will be as follows:

 

   

no gain or loss will be recognized by, or be includible in the income of, a U.S. holder as a result of the receipt of BFS common stock pursuant to the merger agreement, except for any gain or loss recognized with respect to cash received in lieu of a fractional share of BFS common stock as described below;



 

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the aggregate tax basis in the shares of BFS common stock received by a U.S. holder pursuant to the merger (including fractional shares deemed received as described below) will be equal to such holder’s aggregate tax basis in its BMC common stock surrendered in exchange for the BFS common stock;

 

   

a U.S. holder’s holding period for the BFS common stock received in the merger (including fractional shares deemed received as described below) will include the holding period for the BMC common stock surrendered in the merger; and

 

   

a U.S. holder that receives cash in lieu of a fractional share of BFS common stock will be treated as having received such fractional share pursuant to the merger and then as having sold such fractional share for cash. Gain or loss generally will be recognized based on the difference between the amount of cash received in lieu of the fractional share and such holder’s adjusted basis in the fractional share. Such gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the U.S. holder’s holding period for the relevant shares is greater than one year. For U.S. holders of BMC common stock that are non-corporate holders, long-term capital gain generally will be taxed at a U.S. federal income tax rate that is lower than the rate for ordinary income or for short-term capital gains. The deductibility of capital losses is subject to limitations.

You should read the section entitled “Material United States Federal Income Tax Consequences” beginning on page 186 for a more complete discussion of the material U.S. federal income tax consequences of the merger.

Accounting Treatment (Page 132)

Builders FirstSource and BMC each prepare their respective financial statements in accordance with accounting principles generally accepted in the United States, which are referred to as GAAP. The merger will be accounted for using the acquisition method of accounting, and Builders FirstSource will be treated as the accounting acquirer.

Listing of BFS Common Stock; Delisting and Deregistration of BMC Common Stock (Page 135)

The shares of BFS common stock to be issued in the merger will be listed for trading on Nasdaq under the trading symbol “BLDR.”

If the merger is completed, there will no longer be any publicly held shares of BMC common stock. Accordingly, BMC common stock will no longer be listed on Nasdaq and will be deregistered under the Exchange Act. Under the terms of the merger agreement, BMC is required to cooperate with Builders FirstSource and use its reasonable best efforts to cause the delisting of BMC common stock from the Nasdaq Stock Market LLC, which is referred to as Nasdaq, and the termination of registration of BMC common stock under the Exchange Act as soon as reasonably practicable following the effective time.

Interests of Builders FirstSources Directors and Executive Officers in the Merger (Page 176)

In considering the BFS board of director’s recommendation to vote for the BFS share issuance proposal and the BFS charter amendment proposal, and to secure the required votes of the BFS stockholders, the BFS stockholders should be aware that the directors and executive officers of Builders FirstSource may have interests in the merger that are different from, or in addition to, the interests of BFS stockholders generally.

Members of the BFS board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the BFS stockholders that the BFS share issuance be approved and BFS charter amendment be adopted. For more information, please see the section entitled “Interests of Builders FirstSource’s Directors and Executive Officers in the Merger” beginning on page 176.



 

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Interests of BMCs Directors and Executive Officers in the Merger (Page 178)

In considering the BMC board of director’s recommendation to vote for the BMC merger agreement proposal, and to secure the required votes of the BMC stockholders, the BMC stockholders should be aware that the directors and executive officers of BMC may have interests in the merger that are different from, or in addition to, the interests of BMC stockholders generally.

Members of the BMC board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the BMC stockholders that the BMC merger agreement proposal be approved. For more information, please see the section entitled “Interests of BMC’s Directors and Executive Officers in the Merger” beginning on page 178.

Comparison of Stockholders Rights (Page 188)

Upon completion of the merger, BMC stockholders receiving shares of BFS common stock will become stockholders of Builders FirstSource, and their rights will be governed by Delaware law and the governing corporate documents of Builders FirstSource in effect at the effective time. While Builders FirstSource and BMC are both Delaware corporations subject to the DGCL, BMC stockholders will have different rights once they become stockholders of Builders FirstSource due to differences between the governing corporate documents of BMC and the governing corporate documents of Builders FirstSource. These differences are described in more detail under the section entitled “Comparison of Stockholders’ Rights” beginning on page 188.

No Appraisal Rights (Page 203)

Holders of BMC common stock will not have rights to an appraisal of the fair value of their shares regardless of whether they vote for or against the merger (or abstain or do not cast a vote). Under the DGCL, appraisal rights are not available for shares of any class or series of stock, which stock, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of stockholders or act upon an agreement of merger or consolidation, is either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders, unless the stockholders receive in exchange for their shares anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash in lieu of fractional shares or fractional depositary receipts described above, or any combination of the foregoing. Because BMC common stock was listed on Nasdaq, a national securities exchange, on the record date, and holders of shares of BMC common stock will receive only a combination of shares of BFS common stock, which is listed on Nasdaq, and, if applicable, cash in lieu of fractional shares, BMC stockholders will not be entitled to appraisal rights in connection with the merger.

Because the merger is of Merger Sub with and into BMC, BFS is not a constituent entity to the merger and holders of BFS common stock will continue to hold their shares following the completion of the merger and are not entitled to appraisal rights in connection with the merger.

Certain Beneficial Owners of BFS Common Stock (Page 206)

At the close of business on November 13, 2020, directors and executive officers of Builders First Source beneficially owned and were entitled to vote approximately 1,929,075 shares of BFS common stock, collectively representing 1.7% of the shares of BFS common stock outstanding on such date. Although none of them has entered into any agreement obligating them to do so, Builders FirstSource currently expects that all of its directors and executive officers will vote their shares “FOR” the BFS share issuance proposal,



 

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FOR” the BFS charter amendment proposal, and “FOR” the BFS adjournment proposal. For more information regarding the security ownership of Builders FirstSource’s directors and executive officers, please see the information provided in the section entitled “Certain Beneficial Owners of BFS Common Stock—Security Ownership of Builders FirstSource’s Directors and Executive Officers” beginning on page 206.

Certain Beneficial Owners of BMC Common Stock (Page 208)

At the close of business on November 13, 2020, directors and executive officers of BMC beneficially owned and were entitled to vote approximately 427,188 shares of BMC common stock, collectively representing 0.63% of the shares of BMC common stock outstanding on such date. Although none of them has entered into any agreement obligating them to do so, BMC currently expects that all of its directors and executive officers will vote their shares “FOR” the BMC merger agreement proposal, “FOR” the BMC compensation proposal, and “FOR” the BMC adjournment proposal. For more information regarding the security ownership of BMC’s directors and executive officers, please see the information provided in the section entitled “Certain Beneficial Owners of BMC Common Stock—Security Ownership of BMC’s Directors and Executive Officers” beginning on page 208.

Litigation Relating to the Merger (Page 135)

As of November 13, 2020, one lawsuit has been filed by a purported stockholder of Builders FirstSource and four lawsuits have been filed by purported stockholders of BMC in connection with the proposed merger between Builders FirstSource and BMC.

The plaintiffs generally assert claims under Section 14(a), Rule 14a-9 promulgated thereunder, and Section 20(a) of the Exchange Act, contending that the registration statement on Form S-4 filed with the SEC by Builders FirstSource on October 8, 2020, and serving as the preliminary joint proxy statement/prospectus, omitted or misrepresented material information regarding the proposed merger between Builders FirstSource and BMC. The complaints generally seek, among other relief, an injunction preventing Builders FirstSource and BMC from consummating the transaction, dissemination of a registration statement that does not contain any untrue or misleading statements of material fact, rescission or rescissory damages, a declaration that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act, and an award of plaintiffs’ costs, including attorneys’ fees and expenses and any other relief the court may deem proper. For a more detailed description of litigation in connection with the merger, see “The Merger—Litigation Relating to the Merger” beginning on page 135. Builders FirstSource, BMC and the other named defendants deny that they have violated any laws or breached any duties to Builders FirstSource’s or BMC’s stockholders and believe the claims asserted in the complaints are without merit.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BUILDERS FIRSTSOURCE

The following tables present selected historical consolidated financial data of Builders FirstSource. The selected historical consolidated financial data as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017, have been derived from Builders FirstSource’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2019 contained in Builders FirstSource’s Annual Report on Form 10-K filed on February 21, 2020, which is incorporated by reference into this joint proxy statement/prospectus. The selected historical consolidated financial data as of December 31, 2017, 2016 and 2015, and for the years ended December 31, 2016 and 2015, have been derived from Builders FirstSource’s audited consolidated financial statements for such years and accompanying notes, which are not incorporated by reference into this joint proxy statement/prospectus.

The unaudited selected financial data for Builders FirstSource as of September 30, 2020, and for the nine months ended September 30, 2020 and 2019, have been derived from Builders FirstSource’s unaudited condensed consolidated financial statements and accompanying notes contained in Builders FirstSource’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which is incorporated by reference into this joint proxy statement/prospectus. The unaudited selected financial data for Builders FirstSource as of September 30, 2019 have been derived from Builders FirstSource’s unaudited condensed consolidated financial statements and accompanying notes contained in Builders FirstSource’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which is not incorporated by reference into this joint proxy statement/prospectus. The unaudited condensed consolidated financial data, in the opinion of Builders FirstSource’s management, include all recurring adjustments and normal accruals necessary for a fair statement of Builders FirstSource’s financial data for the dates and periods presented. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

The information set forth below is only a summary and is not necessarily indicative of future results and should be read together with the other information contained in Builders FirstSource’s Annual Report on Form 10-K for the year-ended December 31, 2019 and Builders FirstSource’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein. For more information, please see the section entitled “Where You Can Find More Information” beginning on page 213.

 

     Nine months ended
September 30,
     Year ended December 31,  
(in thousands, except per share
amounts)
   2020      2019      2019      2018      2017      2016      2015  

Income Statement Data

                    

Net sales

   $ 6,028,114      $ 5,516,858      $ 7,280,431      $ 7,724,771      $ 7,034,209      $ 6,367,284      $ 3,564,425  

Income (loss) from operations before income taxes

     223,174        235,097        282,755        260,755        91,929        21,669        (18,444

Net income (loss)

     173,623        180,442        221,809        205,191        38,781        144,341        (22,831

Per Share Data

                    

Net income (loss) per share:

                    

Basic

   $ 1.49      $ 1.56      $ 1.92      $ 1.79      $ 0.34      $ 1.30      $ (0.22

Diluted

   $ 1.48      $ 1.54      $ 1.90      $ 1.76      $ 0.34      $ 1.27      $ (0.22


 

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     Nine months ended
September 30,
     Year ended December 31,  
(in thousands, except per share
amounts)
   2020      2019      2019      2018      2017      2016      2015  

Weighted average common shares outstanding:

                    

Basic

     116,542        115,639        115,713        114,586        112,587        110,754        103,190  

Diluted

     117,690        116,870        117,025        116,554        115,597        113,585        103,190  

Cash dividends paid per common share(1)

                                                

Balance Sheet Data

                    

Total assets

   $ 4,014,934      $ 3,297,759      $ 3,249,490      $ 2,932,309      $ 3,006,124      $ 2,909,887      $ 2,882,038  

Long-term debt, net (including current maturities)

     1,603,673        1,364,837        1,291,273        1,561,294        1,784,420        1,802,052        1,951,671  

 

(1) 

Builders FirstSource did not declare or pay dividends on its common stock during the periods presented.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BMC

The following tables present selected historical consolidated financial data of BMC. The selected historical consolidated financial data as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017, have been derived from BMC’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2019 contained in BMC’s Annual Report on Form 10-K filed on February 27, 2020, which is incorporated by reference into this joint proxy statement/prospectus. The selected historical consolidated financial data as of December 31, 2017, 2016 and 2015, and for the years ended December 31, 2016 and 2015, have been derived from BMC’s audited consolidated financial statements for such years and accompanying notes, which are not incorporated by reference into this joint proxy statement/prospectus.

The unaudited selected financial data for BMC as of September 30, 2020, and for the nine months ended September 30, 2020 and 2019, have been derived from BMC’s unaudited condensed consolidated financial statements and accompanying notes contained in BMC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which is incorporated by reference into this joint proxy statement/prospectus. The unaudited selected financial data for BMC as of September 30, 2019 have been derived from BMC’s unaudited condensed consolidated financial statements and accompanying notes contained in BMC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which is not incorporated by reference into this joint proxy statement/prospectus. The unaudited condensed consolidated financial data, in the opinion of BMC’s management, include all recurring adjustments and normal accruals necessary for a fair statement of BMC’s financial data for the dates and periods presented. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

The information set forth below is only a summary and is not necessarily indicative of future results and should be read together with the other information contained in BMC’s Annual Report on Form 10-K filed on February 27, 2020 and in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein. For more information, please see the section entitled “Where You Can Find More Information” beginning on page 213.

 

     Nine months ended
September 30,
     Year ended December 31,  
(in thousands, except per share
amounts)
   2020      2019      2019      2018      2017      2016      2015(1)  

Income Statement Data

                    

Net sales

   $ 2,991,118      $ 2,736,029      $ 3,626,593      $ 3,682,448      $ 3,365,968      $ 3,093,743      $ 1,576,746  

Income (loss) before income taxes

     144,980        119,326        146,484        156,914        81,827        45,146        (14,520

Net income (loss)

     110,546        89,646        109,845        119,738        57,425        30,880        (4,831

Per Share Data

                    

Net income (loss) per common share

                    

Basic

   $ 1.65      $ 1.34      $ 1.65      $ 1.78      $ 0.86      $ 0.47      $ (0.12

Diluted

     1.63        1.33        1.63        1.77        0.85        0.46        (0.12

Weighted average common shares outstanding

                    

Basic

     67,001        66,681        66,701        67,273        66,900        66,055        41,260  

Diluted

     67,725        67,240        67,332        67,748        67,404        66,609        41,260  

Cash dividends paid per common share(2)

                                                

Balance Sheet Data

                    

Total assets(3)

   $ 2,177,534      $ 1,880,188      $ 1,906,101      $ 1,576,111      $ 1,473,350      $ 1,395,014      $ 1,371,139  

Total debt and finance lease obligations (including current portion)

     354,558        362,024        358,568        360,703        371,636        376,563        426,840  

 

(1)

On December 1, 2015, Building Materials Holding Corporation, which is referred to as BMHC, and Stock Building Supply Holdings, Inc., which is referred to as SBS, completed a merger, pursuant to which BMHC merged with and into SBS. As the merger constituted a



 

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  reverse acquisition for accounting purposes under GAAP, the historical financial statements of BMC reflect only the operations and financial conditions of BMHC. The operating results of SBS are reported as part of BMC beginning on the closing date of the merger.
(2)

BMC did not declare or pay dividends on the BMC common stock during the periods presented.

(3)

On January 1 2019, BMC adopted Accounting Standards Update 2016-02, Leases, as amended, which is referred to as Topic 842, by applying the guidance at adoption date. As a result, periods prior to the adoption date have not been adjusted and continue to be reported under ASC 840, Leases. See Note 7 to the consolidated financial statements included in Item 8 “Financial Statements and Supplementary Data” contained in BMC’s Annual Report on Form 10-K filed on February 27, 2020 for a discussion of BMC’s adoption of Topic 842.



 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following table shows selected unaudited pro forma condensed combined financial information about the financial condition and results of operations of the combined company after giving effect to the merger as described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” The selected unaudited pro forma condensed combined balance sheet data as of September 30, 2020 give effect to the merger as if it occurred on September 30, 2020. The selected unaudited pro forma condensed combined statement of operations data for the nine months ended September 30, 2020 and the year ended December 31, 2019 give effect to the merger as if it occurred on January 1, 2019, the first day of Builders FirstSource’s 2019 fiscal year.

The selected pro forma data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of the combined company appearing elsewhere in this joint proxy statement/prospectus and the accompanying notes to the pro forma financial information. Additionally, the unaudited pro forma condensed combined financial information contains estimated adjustments, based upon available information and certain assumptions that management believes are reasonable under the circumstances. The assumptions underlying the pro forma adjustments are described in greater detail in the section entitled “Notes to Unaudited Pro Forma Condensed Combined Financial Information.” In addition, the pro forma financial information were based on, and should be read in conjunction with, the historical consolidated financial statements and related notes of Builders FirstSource and BMC for the applicable periods, which have been incorporated in this joint proxy statement/prospectus by reference. Please see the sections entitled “Unaudited Pro Forma Condensed Combined Financial Information” and “Where You Can Find More Information” beginning on pages 37 and 213, respectively.

 

(In thousands, except per share amounts)    Nine months ended
September 30, 2020
     Year ended
December 31, 2019
 

Net sales

   $ 9,019,232      $ 10,907,024  

Income before income taxes

     297,153        259,314  

Net income

   $ 230,918        204,210  

Net income per share:

     

Basic

   $ 1.12      $ 0.99  

Diluted

   $ 1.11      $ 0.99  

Weighted average common shares outstanding:

     

Basic

     206,488        205,659  

Diluted

     207,732        207,031  
               
(In thousands, except per share amounts)           As of
September 30, 2020
 

Total assets

      $ 8,386,467  

Long-term debt, net (including current maturies)

        1,968,812  


 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table summarizes per share data (1) for Builders FirstSource and BMC on a historical basis, (2) for the combined company on an unaudited pro forma combined basis giving effect to the merger and (3) on an unaudited pro forma combined equivalent basis.

The unaudited pro forma income from continuing operations per share for the nine months ended September 30, 2020 and the year ended December 31, 2019 reflects the transactions as if they had occurred on January 1, 2019. The information in the table is based on, and should be read together with, the historical financial information of Builders FirstSource and BMC which is incorporated by reference in this joint proxy statement/prospectus and the financial information contained under “Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Historical Consolidated Financial Data of Builders FirstSource” and “Selected Historical Consolidated Financial Data of BMC.” See the section entitled “Where You Can Find More Information.”

The unaudited pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of actual or future financial position or results of operations that would have been realized if the transactions had been completed as of the dates indicated or will be realized upon the completion of the merger. The summary pro forma information is preliminary, based on initial estimates of the fair value of assets acquired (including intangible assets) and liabilities assumed, and is subject to change as more information regarding the fair values are obtained, which changes could be materially different than the initial estimates.

 

     Historical                

(In thousands, except per share amounts)

   BFS      BMC      Unaudited Pro
Forma
Combined
     Pro Forma
Combined
Equivalent Basis (1)
 

Net income per basic share attributable to common shareholders:

           

Nine months ended September 30, 2020

   $ 1.49      $ 1.65      $ 1.12      $ 1.47  

Twelve months ended December 31, 2019

     1.92        1.65        0.99        1.30  

Net income per diluted share attributable to common shareholders:

           

Nine months ended September 30, 2020

   $ 1.48      $ 1.63      $ 1.11      $ 1.46  

Twelve months ended December 31, 2019

     1.90        1.63        0.99        1.30  

Book value per share

           

As of September 30, 2020

   $ 8.63      $ 16.39      $ 19.52      $ 25.62  

 

(1)

Calculated by multiplying the pro forma combined data by the exchange ratio of 1.3125



 

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COMPARISON OF BUILDERS FIRSTSOURCE AND BMC MARKET PRICES AND

IMPLIED VALUE OF MERGER CONSIDERATION

The following table sets forth the closing price per share of BFS common stock and of BMC common stock as of August 26, 2020, the last trading day prior to the public announcement of the merger, and November 13, 2020, the most recent practicable trading day prior to the date of this joint proxy statement/prospectus. The table also shows the implied value of the merger consideration for each share of BMC common stock as of the same two dates. This implied value was calculated by multiplying the closing price of a share of BFS common stock on the relevant date by the exchange ratio of 1.3125. BFS common stock and the BMC common stock are listed on Nasdaq under the symbols “BLDR” and “BMCH,” respectively.

 

     BFS
Common
Stock
     BMC
Common
Stock
     Implied Per
Share Value
of Merger
Consideration
 

August 26, 2020

   $ 27.91      $ 32.22      $ 36.63  

November 13, 2020

   $ 34.84      $ 45.44      $ 45.73  

The market prices of shares of BFS common stock and BMC common stock have fluctuated since the date of the announcement of the merger and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date the merger is completed, and the market price of shares of BFS common stock will continue to fluctuate after the completion of the merger. No assurance can be given concerning the market prices of BFS common stock or BMC common stock before the completion of the merger or BFS common stock after the completion of the merger. Builders FirstSource will issue a fixed number of shares of BFS common stock in exchange for each share of BMC common stock. As a result, the implied value of the merger consideration to be received by BMC stockholders will fluctuate based on any changes in the market price of BFS common stock prior to the completion of the merger. Accordingly, such implied value of the per share merger consideration to be received by BMC stockholders upon completion of the merger could be greater than, less than or the same as the implied value of the merger consideration on the date of this joint proxy statement/prospectus. We urge you to obtain current market quotations for the shares of BFS common stock and BMC common stock. BFS common stock and BMC common stock are listed on Nasdaq under the symbols “BLDR” and “BMCH,” respectively. For more information, please see the section entitled “Where You Can Find More Information” beginning on page 214.

Dividends

Neither Builders FirstSource nor BMC currently pays a regular dividend on its common stock. Under the terms of the merger agreement, each of Builders FirstSource and BMC agreed to not make, declare or pay any dividend on its capital stock without the other party’s consent. Neither Builders FirstSource nor BMC currently intends to make, declare, or pay any dividend.



 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, and the documents to which Builders FirstSource and BMC refer you to in this registration statement, as well as oral statements made or to be made by Builders FirstSource and BMC, in addition to historical information, contain certain “forward-looking statements” within the meaning of, and subject to the safe harbor created by, Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995, which are referred to as the safe harbor provisions, regarding, among other things, future events or the future financial performance of Builders FirstSource and BMC. Statements included in or incorporated by reference into this registration statement, of which this joint proxy statement/prospectus forms a part, that are not historical facts are forward-looking statements, including statements about the beliefs and expectations of the management of each of Builders FirstSource and BMC. Builders FirstSource and BMC use words such as “may,” “will,” “should,” “plans,” “estimates,” “predicts,” “potential,” “anticipate,” “expect,” “project,” “intend,” “believe,” or the negative of these terms, and words and terms of similar substance used in connection with any discussion of future plans, actions or events identify forward-looking statements that are intended to be covered by the safe harbor provisions. Builders FirstSource and BMC caution investors that any forward-looking statements involve risks and uncertainties that are difficult to predict or quantify, and such risks and uncertainties could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to the COVID-19 pandemic and its impact on the business operations of Builders FirstSource and BMC and on local, national and global economies, the growth strategies of Builders FirstSource and BMC, fluctuations of commodity prices and prices of the products of Builders FirstSource and BMC as a result of national and international economic and other conditions, or the significant dependence of both companies’ revenues and operating results on, among other things, the state of the homebuilding industry and repair and remodeling activity, lumber prices and the economy. Neither Builders FirstSource nor BMC may succeed in addressing these and other risks or uncertainties. Forward-looking statements relating to the proposed merger between Builders FirstSource and BMC include, but are not limited to: statements about the benefits of the proposed merger between Builders FirstSource and BMC, including future financial and operating results; the plans, objectives, expectations and intentions of Builders FirstSource and BMC; the expected timing of completion of the proposed merger; and other statements relating to the proposed merger that are not historical facts. Forward-looking statements are based on information currently available to Builders FirstSource and BMC and involve estimates, expectations and projections. Investors are cautioned that all such forward-looking statements are subject to risks and uncertainties, and important factors could cause actual events or results to differ materially from those indicated by such forward-looking statements. With respect to the proposed merger between Builders FirstSource and BMC, these factors could include, but are not limited to:

 

   

the risk that a condition to completion of the merger may not be satisfied, including as a result of the failure to obtain approval of stockholders of Builders FirstSource and BMC on the expected terms and schedule or at all;

 

   

the length of time necessary to complete the proposed merger, which may be longer than anticipated for various reasons;

 

   

the risk that the businesses will not be integrated successfully;

 

   

the risk that the cost savings, synergies and growth from the proposed merger may not be fully realized or may take longer to realize than expected;

 

   

the assumptions on which the parties’ estimates of future results of the combined business have been based may prove to be incorrect in a number of material ways, which could result in an inability to realize the expected benefits of the proposed merger or exposure to material liabilities;

 

   

the diversion of management time on issues related to the merger;



 

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the effect of future regulatory or legislative actions on the companies or the industries in which they operate;

 

   

the risk that the credit ratings of the combined company may be different from what the parties expect;

 

   

economic and foreign exchange rate volatility;

 

   

changes in the general economic environment, or social or political conditions, that could affect the businesses;

 

   

the potential effect of the completion of the proposed merger on the relationships with customers, suppliers, competitors, lenders, landlords, management and other employees;

 

   

the ability to attract new customers and retain existing customers in the manner anticipated or at all;

 

   

the ability to hire and retain key personnel;

 

   

reliance on and integration of information technology systems;

 

   

the risks associated with assumptions the parties make in connection with the parties’ critical accounting estimates and legal proceedings;

 

   

the occurrence of any change, event, series of events or circumstances that could give rise to the termination of the merger agreement, including a termination of the merger agreement under circumstances that could require BMC to pay a termination fee to Builders FirstSource or require Builders FirstSource to pay a termination fee to BMC;

 

   

the stock price for BFS common stock and BMC common stock could change, before the completion of the merger, including as a result of uncertainty as to the long-term value of the common stock of the combined company following the merger or as a result of broader stock market movements;

 

   

risks that the merger and the other transactions contemplated by the merger agreement disrupt current plans and operations that may harm Builders FirstSource’s or BMC’s businesses;

 

   

certain restrictions during the pendency of the proposed merger that may affect the ability of Builders FirstSource and BMC to pursue certain business opportunities or strategic transactions;

 

   

the potential of international unrest, economic downturn or effects of anticipated tax rates, raw material costs or availability, benefit or retirement plant costs, or other regulatory compliance costs;

 

   

the outcome of any legal proceedings that have been or may be instituted against Builders FirstSource, BMC and/or others relating to the merger;

 

   

the amount of any costs, fees, expenses, impairments and charges related to the merger;

 

   

the potential dilution of BFS stockholders’ and BMC stockholders’ ownership percentage of the combined company as a result of the merger;

 

   

the business, economic and political conditions in the markets in which Builders FirstSource and BMC operate;

 

   

events beyond Builders FirstSource’s and BMC’s control, such as acts of terrorism; and

 

   

the potential dilution of the combined company’s earnings per share as a result of the merger.

These risks and uncertainties may be amplified by the ongoing COVID-19 pandemic, which has caused significant economic uncertainty and negative impacts on capital and credit markets. The extent to which the COVID-19 pandemic impacts Builders FirstSource’s and BMC’s businesses, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous factors, many of which are



 

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unpredictable, including the duration and spread of the pandemic, its severity, the actions to contain the pandemic or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

For further discussion of these and other risks, contingencies and uncertainties applicable to Builders FirstSource and BMC, please see the section entitled “Risk Factors” beginning on page 43 and in Builders FirstSource’s and BMC’s other filings with the SEC incorporated by reference into this joint proxy statement/prospectus. Please see also the section entitled “Where You Can Find More Information” beginning on page 213 for more information about the SEC filings incorporated by reference into this joint proxy statement/prospectus.

Many of these risks and uncertainties are beyond Builders FirstSource’s or BMC’s ability to control or predict. Because of these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Furthermore, neither Builders FirstSource nor BMC undertakes any obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this joint proxy statement/prospectus. Nothing in this joint proxy statement/prospectus is intended, or is to be construed, as a profit forecast or to be interpreted to mean that the earnings per share of the BFS common stock or of the BMC common stock for the current or any future financial years, or the earnings per share of the common stock of the combined company, will necessarily match or exceed the historical published earnings per share of the common stock of Builders FirstSource or BMC, as applicable. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. All subsequent written and oral forward-looking statements concerning Builders FirstSource, BMC, the merger, the combined company or other matters and attributable to Builders FirstSource, BMC or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above.



 

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RISK FACTORS

In deciding whether to vote for the adoption of the merger agreement, in the case of BMC stockholders, or the approval of the BFS share issuance and the adoption of the BFS charter amendment, in the case of BFS stockholders, you are urged to carefully consider all of the documents and information included or incorporated by reference in this joint proxy statement/prospectus, which are listed in the section entitled “Where You Can Find More Information” beginning on page 213. You should also read and consider the risks associated with each of the businesses of Builders FirstSource and BMC because these risks will also affect the combined company. The risks associated with the business of Builders FirstSource can be found in the Builders FirstSource Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and the risks associated with the business of BMC can be found in the BMC Annual Report on Form 10-K for the year ended December 31, 2019, in each case, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K (excluding any information and exhibits furnished under Item 2.02 or 7.01 thereof), each of which are incorporated by reference into this joint proxy statement/prospectus. In addition, you are urged to carefully consider the following material risks relating to the merger, the business of Builders FirstSource, the business of BMC and the business of the combined company.

Risks Relating to the Merger

Because the exchange ratio is fixed and will not be adjusted in the event of any change in either Builders FirstSource’s or BMC’s stock price, the value of the merger consideration is uncertain.

Upon completion of the merger, each share of BMC common stock outstanding immediately prior to the merger (other than canceled shares) will be converted into and become exchangeable for 1.3125 shares of BFS common stock. This exchange ratio is fixed in the merger agreement and will not be adjusted for changes in the market price of either BFS common stock or BMC common stock. The market prices of BFS common stock and BMC common stock have fluctuated since the date of the announcement of the merger agreement and will continue to fluctuate through the date of the BFS stockholder meeting and the BMC stockholder meeting, respectively. The market price of BFS common stock will also continue to fluctuate through and after the date the merger is completed.

Builders FirstSource will issue a fixed number of shares of BFS common stock in exchange for each share of BMC common stock. As a result, the implied value of the merger consideration to be received by BMC stockholders will fluctuate based on any changes in the market price of BFS common stock prior to the completion of the merger. Accordingly, such implied value of the per share merger consideration to be received by BMC stockholders upon completion of the merger could be greater than, less than or the same as the implied value of the merger consideration on the date of this joint proxy statement/prospectus. BMC stockholders will not know or be able to determine at the time of the BMC stockholder meeting the market value of the merger consideration they would receive upon completion of the merger. Similarly, BFS stockholders will not know or be able to determine at the time of the BFS stockholder meeting the market value of the shares of BFS common stock to be issued pursuant to the merger agreement compared to the market value of the shares of BMC common stock that are being exchanged.

Stock price changes may result from a variety of factors, including, among others:

 

   

general market and economic conditions;

 

   

changes in Builders FirstSource’s and BMC’s respective businesses, operations and prospects;

 

   

market assessments of the likelihood that the merger will be completed;

 

   

interest rates, general market, industry and economic conditions, and other factors generally affecting the respective prices of BFS common stock and BMC common stock;

 

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federal, state and local legislation, governmental regulation and legal developments in the industry segments in which BMC and Builders FirstSource operate; and

 

   

the timing of the merger and regulatory considerations.

Many of these factors are beyond Builders FirstSource’s and BMC’s control, and neither Builders FirstSource nor BMC are permitted to terminate the merger agreement solely due to a decline in the market price of the other party. You are urged to obtain current market quotations for BFS common stock and BMC common stock in determining whether to vote for approval of the BFS share issuance and the adoption of the BFS charter amendment, in the case of BFS stockholders, or for the adoption of the merger agreement, in the case of BMC stockholders. In addition, please see the section entitled “Comparison of Builders FirstSource and BMC Market Prices and Implied Value of Merger Consideration” beginning on page 39.

The market price for shares of common stock of the combined company following the completion of the merger may be affected by factors different from, or in addition to, those that historically have affected or currently affect the market prices of shares of BFS common stock and BMC common stock.

Upon completion of the merger, BFS stockholders and BMC stockholders will both hold shares of BFS common stock. The businesses of Builders FirstSource and BMC differ in certain important respects, and, accordingly, the results of operations of Builders FirstSource after the merger, as well as the market price of BFS common stock, may be affected by some factors that are different from those currently or historically affecting the businesses or results of operations of Builders FirstSource and those currently or historically affecting the businesses or results of operations of BMC. The results of operations of the combined company may also be affected by factors different from those that currently affect or have historically affected either Builders FirstSource or BMC. For a discussion of the businesses of each of Builders FirstSource and BMC and some important factors to consider in connection with those businesses, please see the section entitled “The Parties to the Merger” beginning on page 57 and the documents and information included elsewhere in this joint proxy statement/prospectus or incorporated by reference into this joint proxy statement/prospectus and listed under the section entitled “Where You Can Find More Information” beginning on page 213.

Obtaining required approvals and satisfying conditions to the completion of the merger may prevent or delay completion of the merger.

The merger is subject to a number of conditions to completion as specified in the merger agreement. These conditions to completion include, among others, (i) receipt of the approval of the BFS share issuance and the adoption of the BFS charter amendment by the holders of BFS common stock and the adoption of the merger agreement by the holders of BMC common stock; (ii) approval for listing on Nasdaq, subject to official notice of issuance, of the shares of BFS common stock to be issued in the BFS share issuance; (iii) the absence of any law or order (whether preliminary, temporary or permanent) enacted or promulgated and remaining in effect that enjoins, prevents, makes illegal or prohibits the completion of the merger or the BFS stock issuance; (iv) the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part and the absence of a stop order or proceedings seeking a stop order by the SEC; and (v) expiration or termination of the waiting period under the HSR Act applicable to the transactions contemplated by the merger agreement. The obligation of each of BMC and Builders FirstSource to complete the merger is also conditioned on (a) the accuracy of the other party’s representations and warranties made in the merger agreement, subject to materiality standards in the merger agreement; (b) the performance, in all material respects, of all of the other party’s obligations under the merger agreement required to be performed at or prior to the completion of the merger; (c) since the date of the merger agreement, there must not have occurred and be continuing with respect to the other party any material adverse effect or any event, change, effect, development or occurrence that would reasonably be expected to result in, individually or in the aggregate, a material adverse effect on such other party; (d) such party must have received a certificate executed by an executive officer of the other party certifying as to the satisfaction of the conditions in the three preceding bullets regarding representations and warranties, the

 

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performance of covenants and the absence of any material adverse effect; and (e) such party must have received a written legal opinion to the effect that for U.S. federal income tax purposes the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. No assurance can be given that the required stockholder, governmental and regulatory consents and approvals will be obtained or that the required conditions to the completion will be satisfied, and, if all required consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the consents and approvals. Any delay in completing the merger could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that Builders FirstSource and BMC expect to achieve if the merger is successfully completed within its expected time frame. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, please see the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 152.

Failure to attract, motivate and retain executives and other key employees could diminish the anticipated benefits of the merger.

The success of the merger will depend in part on the retention of personnel critical to the business and operations of the combined company due to, for example, their technical skills or management expertise. Competition for qualified personnel can be intense. Current and prospective employees of Builders FirstSource and BMC may experience uncertainty about their future role with Builders FirstSource and BMC until strategies with regard to these employees are announced or executed, which may impair Builders FirstSource’s and BMC’s ability to attract, retain and motivate key management, sales, marketing, and other personnel prior to and following the merger. Employee retention may be particularly challenging during the pendency of the merger, as employees of Builders FirstSource and BMC may experience uncertainty about their future roles with the combined company. If Builders FirstSource and BMC are unable to retain personnel, including Builders FirstSource’s and BMC’s key management, Builders FirstSource and BMC could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how, and unanticipated additional recruitment and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the merger.

If key employees of Builders FirstSource or BMC depart, the integration of the companies may be more difficult and the combined company’s business following the merger may be harmed. Furthermore, the combined company may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the business of each of Builders FirstSource or BMC, and the combined company’s ability to realize the anticipated benefits of the merger may be materially and adversely affected. In addition, there could be disruptions to or distractions for the workforce and management associated with activities of labor unions or integrating employees into the combined company. Accordingly, no assurance can be given that the combined company will be able to attract or retain key employees of Builders FirstSource and BMC to the same extent that those companies have been able to attract or retain their own employees in the past.

The merger, including uncertainty regarding the merger, may cause customers, suppliers or strategic partners to delay or defer decisions concerning Builders FirstSource and BMC, and may adversely affect each company’s ability to effectively manage its respective businesses.

The merger will happen only if the stated conditions are satisfied, including the adoption of the merger agreement by BMC’s stockholders, the approval of the BFS share issuance and the adoption of the BFS charter amendment by the BFS stockholders and the receipt of regulatory approvals, among other conditions. Many of the conditions are outside the control of Builders FirstSource and BMC, and both parties also have certain rights to terminate the merger agreement. Accordingly, there may be uncertainty regarding the completion of the merger. This uncertainty may cause customers, suppliers, vendors, strategic partners or others that deal with Builders FirstSource and/or BMC to delay or defer entering into contracts with Builders FirstSource and BMC or making other decisions concerning Builders FirstSource and BMC, or to seek to change or cancel existing

 

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business relationships with Builders FirstSource and BMC, which could negatively affect their respective businesses. Any delay or deferral of those decisions or changes in existing agreements could have a material adverse effect on the respective businesses of Builders FirstSource and BMC, regardless of whether the merger is ultimately completed.

In addition, the merger agreement restricts Builders FirstSource, BMC and their respective subsidiaries from making certain acquisitions and taking other specified actions until the merger occurs without the consent of the other parties. These restrictions may prevent Builders FirstSource and BMC from pursuing attractive business opportunities or strategic transactions that may arise prior to the completion of the merger. Please see the section entitled “The Merger Agreement—Conduct of Business Prior to the Effective Time” beginning on page 141 for a description of the restrictive covenants to which each of Builders FirstSource and BMC is subject.

Until the completion of the merger or the termination of the merger agreement in accordance with its terms, Builders FirstSource and BMC are each prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Builders FirstSource or BMC and their respective stockholders.

From and after the date of the merger agreement and prior to the effective time, the merger agreement restricts Builders FirstSource and BMC from taking specified actions without the consent of the other party and requires that the business of each company and its respective subsidiaries be conducted in all material respects in the ordinary course of business, consistent with past practice, subject to certain exceptions related to COVID-19. These restrictions may prevent Builders FirstSource or BMC from making appropriate changes to their respective businesses or organizational structures or from pursuing attractive business opportunities that may arise prior to the completion of the merger and could have the effect of delaying or preventing other strategic transactions. Adverse effects arising from the pendency of the merger could be exacerbated by any delays in completion of the merger or termination of the merger agreement. Please see the section entitled “The Merger Agreement—Conduct of Business Prior to the Effective Time” beginning on page 141.

The shares of common stock of the combined company to be received by BMC stockholders as a result of the merger will have rights different from the shares of BMC common stock.

Upon completion of the merger, the rights of BMC stockholders, who will become stockholders of Builders FirstSource, will be governed by the certificate of incorporation and bylaws of Builders FirstSource. The rights associated with BMC common stock are different from the rights associated with BFS common stock. Please see the section entitled “Comparison of Stockholders’ Rights” beginning on page 188 for a discussion of these rights.

BFS stockholders and BMC stockholders will each have reduced ownership and voting interest in and will exercise less influence over management of the combined company.

BFS stockholders currently have the right to vote in the election of the BFS board of directors and on other matters affecting Builders FirstSource, and BMC stockholders currently have the right to vote in the election of the BMC board of directors and on other matters affecting BMC. Upon completion of the merger, each BFS stockholder and each BMC stockholder will become a stockholder of the combined company with a percentage ownership of the combined company that is smaller than such stockholder’s percentage ownership of BMC or Builders FirstSource, respectively, immediately prior to the merger. Immediately following completion of the merger, holders of shares of BFS common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 57% of the issued and outstanding shares of BFS common stock, and holders of shares of BMC common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 43% of the issued and outstanding shares of BFS common stock on a fully diluted basis and based on the number of shares of BFS common stock and BMC common stock outstanding as of November 13, 2020. The exact equity stake of BFS stockholders and BMC stockholders in the combined company immediately following the merger will depend on the number of shares of BFS common stock and

 

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BMC common stock issued and outstanding immediately prior to the merger. In addition, the board of directors of Builders FirstSource will be compromised of seven directors of Builders FirstSource and five directors of BMC, in each case, as of immediately prior to the effective time. Accordingly, BFS stockholders and BMC stockholders will have less influence on the management and policies of the combined company than they now have on the management and policies of Builders FirstSource or BMC, as applicable.

Whether or not the merger is completed, the announcement and pendency of the merger will divert significant management resources to complete the merger, which could cause disruptions in the businesses of Builders FirstSource and BMC and could have an adverse effect on their respective businesses and financial results.

Whether or not the merger is completed, the announcement and pendency of the merger could cause disruptions in the businesses of Builders FirstSource and BMC. Specifically:

 

   

current and prospective employees of Builders FirstSource and BMC may experience uncertainty about their future roles with the combined company, which might adversely affect Builders FirstSource’s and BMC’s abilities to retain key managers and other employees; and

 

   

the attention of management of each of Builders FirstSource and BMC, which would otherwise have been devoted to the day-to-day operations of their respective companies, may be diverted toward the completion of the merger.

Builders FirstSource and BMC have each diverted significant management resources in an effort to complete the merger and are each subject to restrictions contained in the merger agreement on the conduct of their respective businesses. If the merger is not completed, Builders FirstSource and BMC will have incurred significant costs, including the diversion of management resources, for which they will have received little or no benefit.

The merger agreement may be terminated in accordance with its terms and the merger may not be completed.

Either Builders FirstSource or BMC may terminate the merger agreement under certain circumstances, including, among other reasons, if the merger is not completed by the outside date of May 26, 2021, which date may be extended to August 26, 2021, if, at 5:00 p.m., Eastern Time, on the outside date, all of the conditions to the completion of the merger described in the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 152 have been satisfied or duly waived by all parties entitled to the benefit thereof (except for (i) conditions regarding (a) the existence of a legal restraint that relates to antitrust laws or (b) expiration or termination of the waiting period under the HSR Act and (ii) any other condition that by its nature is to be satisfied at the completion of the merger). In addition, if the merger agreement is terminated under certain circumstances specified in the merger agreement, BMC may be required to pay Builders FirstSource a termination fee of $66,000,000, including certain circumstances in which the BMC board of directors effects a change of recommendation (as defined in the section entitled “The Merger Agreement—No Change of Recommendation” beginning on page 146) or BMC enters into an agreement with respect to a superior acquisition proposal (as defined in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144) following the termination of the merger agreement. In addition, if the merger agreement is terminated under certain circumstances specified in the merger agreement, Builders FirstSource may be required to pay BMC a termination fee of $100,000,000, including certain circumstances in which the BFS board of directors effects a change of recommendation or Builders FirstSource enters into an agreement with respect to a superior acquisition proposal following the termination of the merger agreement. Please see the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 154 and the section entitled “The Merger Agreement—Termination Fees” beginning on page 156 for a more complete discussion of the circumstances under which the merger agreement could be terminated and when a termination fee may be payable by Builders FirstSource or BMC.

 

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The termination of the merger agreement could negatively impact Builders FirstSource or BMC.

If the merger is not completed for any reason, including as a result of BMC stockholders failing to adopt the merger agreement or BFS stockholders failing to approve the BFS share issuance or adopt the BFS charter amendment, the ongoing businesses of Builders FirstSource and BMC may be adversely affected and, without realizing any of the benefits of having completed the merger, Builders FirstSource and BMC would be subject to a number of risks, including the following:

 

   

each company may experience negative reactions from the financial markets, including negative impacts on its stock price;

 

   

each company may experience negative reactions from its suppliers, customers, regulators and employees;

 

   

each company will be required to pay their respective costs relating to the merger, such as investment banking, legal, financing and accounting costs and associated fees and expenses, whether or not the merger is completed;

 

   

the merger agreement places certain restrictions on the conduct of each company’s business prior to the completion of the merger and such restrictions, the waiver of which is subject to consent of the other company (not to be unreasonably withheld, conditioned or delayed), may prevent Builders FirstSource or BMC from making certain acquisitions or taking certain other specified actions during the pendency of the merger (see the section entitled “The Merger Agreement—Conduct of Business Prior to the Effective Time” beginning on page 141 for a description of the restrictive covenants applicable to Builders FirstSource and BMC);

 

   

matters relating to the merger (including integration planning) will require substantial commitments of time and resources by Builders FirstSource management and BMC management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to Builders FirstSource or BMC, as applicable, as an independent company; and

 

   

litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against Builders FirstSource and BMC to perform their respective obligations under the merger agreement.

The directors and executive officers of Builders FirstSource and BMC have interests and arrangements that may be different from, or in addition to, those of Builders FirstSource and BMC stockholders generally.

When considering the recommendations of the boards of directors of Builders FirstSource or BMC, as applicable, with respect to the proposals described in this joint proxy statement/prospectus, stockholders should be aware that the directors and executive officers of each of Builders FirstSource and BMC may have interests in the merger which are different from, or in addition to, those of BFS stockholders and BMC stockholders generally. These interests include the continued employment of certain executive officers of Builders FirstSource and BMC by the combined company, the continued service of certain directors of Builders FirstSource and BMC as directors of the combined company, the treatment in the merger of outstanding equity, equity-based and incentive awards, severance arrangements, other compensation and benefit arrangements of BMC’s directors and executive officers, and the right to continued indemnification of Builders FirstSource and former BMC directors and officers by the combined company.

BFS stockholders and BMC stockholders should be aware of these interests when they consider the recommendations of the respective Builders FirstSource and BMC boards of directors that they vote to approve the BFS share issuance and adopt the BFS charter amendment, in the case of Builders FirstSource, or that they adopt the merger agreement, in the case of BMC. The BFS board of directors was aware of these interests when it authorized and approved and declared advisable the merger agreement and the completion of the merger, the BFS share issuance, and the other transactions contemplated by the merger agreement; approved and adopted the

 

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BFS charter amendment, subject to approval of the BFS share issuance and adoption of the BFS charter amendment by BFS stockholders at the BFS stockholder meeting; and recommended that the BFS stockholders approve and adopt the BFS share issuance and the BFS charter amendment. The interests of Builders FirstSource’s directors and executive officers are described in more detail in the section entitled “Interests of Builders FirstSource’s Directors and Executive Officers in the Merger” beginning on page 176. Likewise, the BMC board of directors was aware of these interests when it approved and declared advisable the merger agreement, the merger and the transactions contemplated thereby on the terms and subject to the conditions set forth in the merger agreement, determined that the merger agreement, the merger and the transactions contemplated by the merger agreement were fair to, and in the best interests of, BMC and BMC stockholders and recommended that BMC stockholders adopt the merger agreement. The interests of BMC’s directors and executive officers are described in more detail in the section entitled “Interests of BMC’s Directors and Executive Officers in the Merger” beginning on page 178.

Builders FirstSource or BMC may waive one or more of the conditions to the completion of the merger without re-soliciting stockholder approval.

Builders FirstSource or BMC may determine to waive, in whole or part, one or more of the conditions of its obligations to complete the merger. Builders FirstSource and BMC currently expect to evaluate the materiality of any waiver and its effect on Builders FirstSource or BMC stockholders, as applicable, in light of the facts and circumstances at the time of such waiver, to determine whether any amendment or any re-solicitation of proxies or voting cards is required in light of such waiver. Any determination whether to waive any condition to the completion of the merger or as to re-soliciting stockholder approval or amending this joint proxy statement/prospectus as a result of any such waiver will be made by Builders FirstSource or BMC, as applicable, at the time of such waiver based on the facts and circumstances as they exist at that time.

The merger agreement contains provisions that could discourage a potential competing acquirer that might be willing to pay more to acquire or merge with either Builders FirstSource or BMC.

The merger agreement contains non-solicitation provisions that restrict each of Builders FirstSource’s and BMC’s ability to, among other things (each as described under the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 144):

 

   

solicit, initiate, knowingly facilitate or knowingly encourage (including by way of furnishing information), or take any other action designed to lead to, the submission by any person of an acquisition proposal;

 

   

engage in, continue, knowingly facilitate, knowingly encourage or otherwise participate in any discussions or negotiations related to any acquisition proposal or provide any information to any person in connection with, or related to, any acquisition proposal;

 

   

approve, endorse or recommend any acquisition proposal;

 

   

enter into any contract (including any letter of intent, agreement, agreement in principle or memorandum of understanding) or similar document or commitment related to an acquisition proposal; or

 

   

release or permit the release of any person from, waive or permit the waiver of any right under, or grant any consent or make any election under any “standstill” or similar provision to which Builders FirstSource or BMC, as applicable, is a party, or fail to enforce any provision of such “standstill” or similar provision against any known violation thereof (except if such party’s board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action would be inconsistent with the fiduciary duties of such party’s board of directors under applicable law, in which case such party may waive any such provision solely to the extent necessary to permit the person bound by such provision to make a nonpublic acquisition proposal to its board of directors).

 

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Furthermore, there are only limited exceptions to the requirement under the merger agreement that neither Builders FirstSource’s board of directors nor BMC’s board of directors change, withhold, withdraw, qualify, amend, or modify (or publicly propose to change, withhold, withdraw, qualify, amend, or modify) the Builders FirstSource recommendation or the BMC recommendation, as applicable (as described in the section entitled “The Merger Agreement—No Change of Recommendation” beginning on page 146). Although Builders FirstSource’s board of directors is permitted to effect a change of recommendation, after complying with certain procedures, including submitting the merger agreement for BFS stockholder approval, set forth in the merger agreement, in response to a superior acquisition proposal if it determines in good faith, after consultation with its outside legal counsel and a nationally recognized financial advisor, that the failure of the BFS board of directors to change its recommendation in response to such superior acquisition proposal or intervening event would be inconsistent with the fiduciary duties of such board of directors under applicable law, its doing so would entitle BMC to terminate the merger agreement and collect a termination fee from Builders FirstSource in the amount of $100 million. Although BMC’s board of directors is permitted to effect a change of recommendation, after complying with certain procedures, including submitting the merger agreement for BMC stockholder approval, set forth in the merger agreement, in response to a superior acquisition proposal if it determines in good faith, after consultation with its outside legal counsel and a nationally recognized financial advisor, that the failure of BMC’s board of directors to change its recommendation in response to such superior acquisition proposal or intervening event would be inconsistent with the fiduciary duties of such board of directors under applicable law, its doing so would entitle Builders FirstSource to terminate the merger agreement and collect a termination fee from BMC in the amount of $66 million. For more information, please see the sections entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 154 and “The Merger Agreement—Termination Fees” beginning on page 156.

These provisions could discourage a potential competing acquirer from considering or proposing an acquisition or merger, even if it were prepared to pay consideration with a higher value than that implied by the exchange ratio in the merger, or they could result in a potential competing acquirer proposing to pay a lower per share price than it might otherwise have proposed to pay because of the added expense of the termination fee.

Each of Builders FirstSource and BMC will incur significant transaction, merger-related and integration costs in connection with the merger.

Builders FirstSource and BMC have incurred and expect to incur a number of non-recurring costs associated with combining the operations of the two companies, as well as transaction fees and other costs related to the merger. These costs and expenses include fees paid to financial, legal and accounting advisors, facilities and systems consolidation costs, severance and other potential employment-related costs, filing fees, printing expenses and other related charges. Some of these costs are payable by Builders FirstSource and BMC regardless of whether the merger is completed.

There are also a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the merger and the integration of the two companies’ businesses. The costs related to integration of the two companies will be expensed as a cost of the ongoing results of the combined company. Although Builders FirstSource and BMC expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction, merger-related and integration costs over time, any net benefit may not be achieved in the near term or at all. There may also be additional unanticipated significant costs in connection with the merger that the combined company may not recoup. These costs and expenses could reduce the realization of efficiencies, strategic benefits and additional income Builders FirstSource and BMC expect to achieve from the merger. Many of these costs will be borne by Builders FirstSource and/or BMC even if the merger is not completed. While both Builders FirstSource and BMC have assumed that a certain level of expenses would be incurred in connection with the merger and the other transactions contemplated by the merger agreement, there are many factors beyond their control that could affect the total amount or the timing of the integration and implementation expenses.

 

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BFS stockholders and BMC stockholders will not be entitled to appraisal rights in the merger.

Holders of BMC common stock who do not vote in favor of the merger will not have rights to an appraisal of the fair value of their shares. Because shares of BFS common stock are listed on Nasdaq, a national securities exchange, and are expected to continue to be so listed, and because BMC stockholders are not required by the terms of the merger agreement to accept for their shares anything other than shares of BFS common stock and cash in lieu of fractional shares, holders of BMC common stock will not be entitled to appraisal rights in the merger. Please see the section entitled “No Appraisal Rights” beginning on page 203.

Lawsuits may be filed against Builders FirstSource and BMC challenging the merger. An adverse ruling in any such lawsuit may prevent the merger from being completed.

Governmental authorities or other third parties with appropriate standing may file litigation challenging the merger and seeking an order enjoining or otherwise delaying or prohibiting the completion of the merger. If any such litigation is successful, then such order may prevent the merger from being completed, or from being completed within the expected time frame.

Risks Relating to the Combined Company Following the Merger

The failure to successfully combine the businesses of Builders FirstSource and BMC may adversely affect the combined company’s future results.

The success of the merger will depend, in part, on the ability of the combined company to realize the anticipated benefits from combining the businesses of Builders FirstSource and BMC. To realize these anticipated benefits, the businesses of Builders FirstSource and BMC must be successfully combined. If the combined company is not able to achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

The combined company may not be able to retain customers or suppliers, or customers or suppliers may seek to modify contractual obligations with the combined company, which could have an adverse effect on the combined company’s business and operations.

As a result of the merger, the combined company may experience impacts on relationships with customers and suppliers that may harm its business and results of operations. Certain customers or suppliers may seek to terminate or modify contractual obligations following the merger whether or not contractual rights are triggered as a result of the merger. There can be no guarantee that customers and suppliers will remain with or continue to have a relationship with the combined company or do so on the same or similar contractual terms following the merger. If any of the customers or suppliers seek to terminate or modify contractual obligations or discontinue the relationship with the combined company, then the combined company’s business and results of operations may be harmed. Furthermore, if the combined company’s suppliers were to seek to terminate or modify an arrangement with the combined company, including as a result of bankruptcy of any such suppliers due to poor economic conditions, then the combined company may be unable to procure necessary supplies from other suppliers in a timely and efficient manner and on acceptable terms, or at all. Any of the aforementioned disruptions could limit the combined company’s ability to achieve the anticipated benefits of the merger. The adverse effect of any such disruptions could also be exacerbated by a delay in the completion of the merger or by a termination of the merger agreement.

The combined company may be exposed to increased litigation, which could have an adverse effect on the combined company’s business and operations.

The combined company may be exposed to increased litigation from stockholders, customers, suppliers, consumers and other third parties due to the combination of Builders FirstSource’s business and BMC’s business following the merger. Such litigation may have an adverse impact on the combined company’s business and results of operations or may cause disruptions to the combined company’s operations.

 

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Combining the businesses of Builders FirstSource and BMC may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated benefits of the merger, which may adversely affect the combined company’s business results and negatively affect the value of the BFS common stock following the merger.

The success of the merger will depend on, among other things, the ability of Builders FirstSource and BMC to combine their businesses in a manner that facilitates growth opportunities and realizes cost savings. Builders FirstSource and BMC have entered into the merger agreement because each believes that the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of its respective stockholders and that combining the businesses of Builders FirstSource and BMC will produce benefits and cost savings.

However, Builders FirstSource and BMC must successfully combine their respective businesses in a manner that permits these benefits to be realized. In addition, the combined company must achieve the anticipated growth and cost savings without adversely affecting current revenues and investments in future growth. If the combined company is not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected.

An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the BFS common stock after the completion of the merger.

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual growth and cost savings, if achieved, may be lower than what Builders FirstSource and BMC expect and may take longer to achieve than anticipated. If Builders FirstSource and BMC are not able to adequately address integration challenges, they may be unable to successfully integrate their operations or realize the anticipated benefits of the integration of the two companies.

The failure to successfully integrate the businesses and operations of Builders FirstSource and BMC in the expected time frame may adversely affect the combined company’s future results.

Builders FirstSource and BMC have operated and, until the completion of the merger, will continue to operate independently. There can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Builders FirstSource employees or key BMC employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in integrating the operations of Builders FirstSource and BMC in order to realize the anticipated benefits of the merger so the combined company performs as expected:

 

   

combining the companies’ operations and corporate functions;

 

   

combining the businesses of Builders FirstSource and BMC;

 

   

meeting the capital requirements of the combined company;

 

   

integrating personnel from the two companies;

 

   

integrating the companies’ technologies;

 

   

integrating and unifying the offerings and services available to customers;

 

   

identifying and eliminating redundant and underperforming functions and assets;

 

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harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;

 

   

maintaining existing agreements with customers, distributors, providers and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers and vendors;

 

   

addressing possible differences in business backgrounds, corporate cultures and management philosophies;

 

   

consolidating the companies’ administrative and information technology infrastructure;

 

   

coordinating distribution and marketing efforts;

 

   

managing the movement of certain positions to different locations;

 

   

coordinating geographically dispersed organizations; and

 

   

effecting actions that may be required in connection with obtaining regulatory approvals.

In addition, at times the attention and resources of certain members of either company’s or both companies’ management may be focused on completion of the merger and the integration of the businesses of the two companies, and diverted from day-to-day business operations or other opportunities that may have been beneficial to the applicable company, which may disrupt each company’s ongoing business and the business of the combined company.

Furthermore, the board of directors and executive leadership of the combined company will consist of certain current directors and executive officers of each of Builders FirstSource and BMC. Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.

The Builders FirstSource and BMC unaudited prospective financial information is inherently subject to uncertainties, the unaudited pro forma financial data included in this document is preliminary and the combined company’s actual financial position and results of operations after the merger may differ materially from these estimates and the unaudited pro forma financial data included in this joint proxy statement/prospectus.

The unaudited pro forma combined financial statements and unaudited pro forma per share data included in this joint proxy statement/prospectus is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates, and is not necessarily indicative of what the combined company’s actual financial position or results of operations would have been had the merger been completed on the dates indicated. The combined company’s actual results and financial position after the merger may differ materially and adversely from the unaudited pro forma financial data included in this joint proxy statement/prospectus. For more information, please see the sections entitled “Comparative Historical and Unaudited Pro Forma Per Share Data” beginning on page 38 and “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 37.

While presented with numeric specificity, the Builders FirstSource and BMC unaudited prospective financial information provided in this joint proxy statement/prospectus is based on numerous variables and assumptions (including, but not limited to, those related to industry performance and competition and general business, construction industry, economic, market and financial conditions and additional matters specific to Builders FirstSource’s or BMC’s business, as applicable) that are inherently subjective and uncertain and are beyond the control of the respective management teams of Builders FirstSource and BMC. As a result, actual results may differ materially from the unaudited prospective financial information. Important factors that may affect actual results and cause these unaudited projected financial forecasts to not be achieved include, but are not

 

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limited to, risks and uncertainties relating to Builders FirstSource’s or BMC’s business, as applicable (including each company’s ability to achieve strategic goals, objectives and targets over applicable periods), construction industry performance, general business and economic conditions, as well as any continuing or worsening economic impact from the COVID-19 pandemic. For more information, please see the sections entitled “The Merger—Certain Unaudited Prospective Financial Information” beginning on page 124 and “The Merger—Certain Estimated Synergies” beginning on page 129.

The COVID-19 pandemic has led to periods of significant volatility in financial and other markets and could harm the business and results of operations for the combined company following the completion of the merger.

The COVID-19 pandemic is having an unprecedented impact on the U.S. economy as federal, state and local governments react to this public health crisis, and has impacted, and could continue to impact, the business of each of Builders FirstSource and BMC and created significant uncertainties for the building materials industry and the economy in general. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19 pandemic on the businesses of Builders FirstSource and BMC, and there is no guarantee that efforts by Builders FirstSource and BMC to address the adverse impacts of the COVID-19 pandemic will be effective. The impact to date has included periods of significant volatility in financial and other markets. This volatility, if it continues, could have an adverse impact on Builders FirstSource’s and BMC’s customers, businesses, financial conditions, and results of operations.

In addition, recent actions by U.S. federal and state governments to address the COVID-19 pandemic, including travel restrictions, quarantines, return-to-work restrictions, and site closures, may also have a significant adverse effect on the jurisdictions in which Builders FirstSource and BMC conduct their businesses as well as on the companies’ ability to staff manufacturing facilities and operations centers. The extent of impacts resulting from the COVID-19 pandemic and other events beyond the control of Builders FirstSource and BMC will depend on future developments, which are highly uncertain and cannot be predicted.

In addition, the efforts to integrate the businesses of Builders FirstSource and BMC may be delayed and/or adversely affected by the COVID-19 pandemic and become more costly. Each of Builders FirstSource and BMC may incur additional costs to remedy damages caused by any disruptions due to the COVID-19 pandemic, which could adversely affect their businesses, financial conditions and results of operations.

Builders FirstSource and BMC will incur significant transaction, merger-related and integration costs in connection with the merger.

Builders FirstSource and BMC have incurred and expect to incur a number of non-recurring costs associated with combining the operations of the two companies. These costs and expenses include fees paid to financial, legal and accounting advisors, facilities and systems consolidation costs, severance and other potential employment-related costs, printing expenses and other related charges. Some of these costs are payable by Builders FirstSource and BMC regardless of whether the merger is completed. There are also a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the merger and the integration of the two companies’ businesses. While both Builders FirstSource and BMC have assumed that a certain level of expenses would be incurred in connection with the merger and the other transactions contemplated by the merger agreement, there are many factors beyond their control that could affect the total amount or the timing of the integration and implementation expenses.

There may also be additional unanticipated significant costs in connection with the merger that the combined company may not recoup. These costs and expenses could reduce the realization of efficiencies, strategic benefits and additional income Builders FirstSource and BMC expect to achieve from the merger. Although Builders FirstSource and BMC expect that these benefits will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all.

 

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Third parties may terminate or alter existing contracts or relationships with Builders FirstSource or BMC.

BMC has contracts with customers, suppliers, vendors, landlords and other business partners which may require BMC to obtain consent from these other parties in connection with the merger. If these consents cannot be obtained, the combined company may suffer a loss of potential future revenue and may lose rights that are material to its business and the business of the combined company. In addition, third parties with whom Builders FirstSource or BMC currently have relationships may terminate or otherwise reduce the scope of their relationship with either party in anticipation of the merger. Any such disruptions could limit the combined company’s ability to achieve the anticipated benefits of the merger. The adverse effect of such disruptions could also be exacerbated by a delay in the completion of the merger or the termination of the merger agreement.

The combined company may be unable to retain Builders FirstSource and BMC personnel successfully after the merger is completed.

The success of the merger will depend in part on the combined company’s ability to retain the talents and dedication of the professionals currently employed by Builders FirstSource and BMC. It is possible that these employees may decide not to remain with Builders FirstSource or BMC, as applicable, while the merger is pending or with the combined company after the merger is completed. If key employees terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating Builders FirstSource and BMC to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, Builders FirstSource and BMC may not be able to locate suitable replacements for any key employees that leave either company or offer employment to potential replacements on reasonable terms.

The combined company’s debt may limit its financial flexibility.

Builders FirstSource and BMC continue to review the treatment of their existing indebtedness and Builders FirstSource and BMC may seek to repay, refinance, repurchase, redeem, exchange or otherwise terminate their existing indebtedness prior to, in connection with or following the completion of the merger. If either Builders FirstSource or BMC seeks to refinance its existing indebtedness, there can be no guarantee that it would be able to execute the refinancing on favorable terms or at all.

Any increase in or modifications to Builders FirstSource’s or BMC’s indebtedness could have adverse effects on such company’s financial condition and results of operations, including:

 

   

increasing its vulnerability to changing economic, regulatory and industry conditions;

 

   

limiting its ability to compete and its flexibility in planning for, or reacting to, changes in its business and the industry;

 

   

limiting its ability to pay dividends to its stockholders;

 

   

limiting its ability to borrow additional funds; and

 

   

requiring it to dedicate a substantial portion of its cash flow from operations to payments on its debt, thereby reducing funds available for working capital, capital expenditures, acquisitions, share repurchases, dividends and other purposes.

The companies’ ability to arrange any additional financing for the purposes described above or otherwise will depend on, among other factors, the companies’ respective financial positions and performance, as well as prevailing market conditions and other factors beyond their control. The level and quality of the combined company’s earnings, operations, business and management, among other things, will impact the determination of its credit ratings. A decrease in the ratings assigned to the combined company by the ratings agencies may negatively impact its access to the debt capital markets and increase its cost of borrowing. There can be no

 

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assurance that the combined company will be able to obtain financing on acceptable terms or at all. In addition, there can be no assurance that the combined company will be able to maintain the current credit worthiness or prospective credit ratings of Builders FirstSource or BMC, and any actual or anticipated changes or downgrades in such credit ratings may have a negative impact on the liquidity, capital position or access to capital markets of the combined company.

Declaration, payment and amounts of dividends, if any, distributed to stockholders of the combined company will be uncertain.

Neither Builders FirstSource nor BMC currently pays a regular dividend on its common stock. Whether any dividends are declared or paid to stockholders of the combined company following the merger, and the amounts of any dividends that are declared or paid, are uncertain and depend on a number of factors. The board of directors of the combined company will have the discretion to determine the dividend policy of the combined company, which may be impacted by any of the following factors:

 

   

the combined company may not have enough cash to pay such dividends due to its cash requirements, capital spending plans, cash flow or financial position;

 

   

decisions on whether, when and in which amounts to make any future distributions will remain at all times entirely at the discretion of the BFS board of directors, which could change its dividend practices at any time and for any reason;

 

   

the combined company’s desire to maintain or improve the credit ratings on its debt;

 

   

the amount of dividends that the combined company may distribute to its stockholders is subject to restrictions under Delaware law and is limited by any restricted payment and leverage covenants in its credit facilities and, potentially, the terms of any future indebtedness that it may incur; and

 

   

certain limitations on the amount of dividends subsidiaries of the combined company can distribute to the combined company, as imposed by state law, regulators or agreements.

Stockholders should be aware that they have no contractual or other legal right to dividends that have not been declared.

Risks Relating to Builders FirstSource’s Business

Builders FirstSource’s business will continue to be subject to the risks described in the sections entitled “Risk Factors” in Builders FirstSource’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and Builders FirstSource’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020, June 30, 2020 and September 30, 2020. Please see the section entitled “Where You Can Find More Information” beginning on page 213 for the location of information incorporated by reference into this joint proxy statement/prospectus.

Risks Relating to BMC’s Business

BMC’s business will continue to be subject to the risks described in the sections entitled “Risk Factors” in BMC’s Annual Report on Form 10-K for the year ended December 31, 2019, and BMC’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2020, June 30, 2020 and September 30, 2020. Please see the section entitled “Where You Can Find More Information” beginning on page 213 for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

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THE PARTIES TO THE MERGER

Builders FirstSource, Inc.

2001 Bryan Street, Suite 1600

Dallas, Texas 75201

(214) 880-3500

Builders FirstSource, Inc., a Delaware corporation, is the largest U.S. supplier of building products, prefabricated components, and value-added services to the professional market segment for new residential construction and repair and remodeling. Builders FirstSource provides customers with an integrated homebuilding solution, offering manufacturing, supply, delivery, and installation of a full range of structural and related building products. Builders FirstSource operates in 40 states with approximately 400 locations, and has a market presence in 77 of the top 100 metropolitan statistical areas, providing geographic diversity and balanced end-market exposure. Builders FirstSource services customers from strategically located distribution and manufacturing facilities that produce value-added products such as roof and floor trusses, wall panels, stairs, vinyl windows, custom millwork and pre-hung doors. It also distributes dimensional lumber and lumber sheet goods, millwork, windows, interior and exterior doors, and other building products.

BFS common stock is listed on Nasdaq under the trading symbol “BLDR.”

For more information about Builders FirstSource, please visit the Builders FirstSource Internet website at http://www.bldr.com. Builders FirstSource’s Internet website address is provided as an inactive textual reference only. The information contained on Builders FirstSource’s Internet website or accessible through it (other than the documents incorporated by reference into this joint proxy statement/prospectus) does not constitute a part of this joint proxy statement/prospectus or any other report or document on file with or furnished to the SEC. Additional information about Builders FirstSource is included in the documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 213.

BMC Stock Holdings, Inc.

4800 Falls of Neuse Road, Suite 400

Raleigh, North Carolina 27609

(919) 431-1000

BMC Stock Holdings, Inc., a Delaware corporation, is a leading provider of diversified building materials and solutions to new construction builders and professional remodelers in the U.S. BMC’s comprehensive portfolio of products and services spans building materials, including millwork and structural component manufacturing capabilities, consultative showrooms and design centers, value-added installation management and an innovative eBusiness platform. BMC serves 45 metropolitan areas across 18 states, principally in the South and West regions.

BMC common stock is listed on the Nasdaq under the trading symbol “BMCH.”

For more information about BMC, please visit BMC’s Internet website at http://www.buildwithBMC.com. BMC’s Internet website address is provided as an inactive textual reference only. The information contained on BMC’s Internet website or accessible through it (other than the documents incorporated by reference into this joint proxy statement/prospectus) does not constitute a part of this joint proxy statement/prospectus or any other report or document on file with or furnished to the SEC. Additional information about BMC is included in the documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 213.

 

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Boston Merger Sub I Inc.

c/o Builders FirstSource, Inc.

2001 Bryan Street, Suite 1600

Dallas, Texas 75201

(214) 880-3500

Boston Merger Sub I Inc., a Delaware corporation and wholly owned subsidiary of Builders FirstSource, was formed solely for the purpose of facilitating the merger. Merger Sub has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the merger and the other transactions contemplated by the merger agreement. By operation of the merger, Merger Sub will be merged with and into BMC, with BMC surviving the merger as a wholly owned subsidiary of Builders FirstSource.

 

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THE BFS STOCKHOLDER MEETING

This joint proxy statement/prospectus is being mailed on or about November 18, 2020, to holders of record of BFS common stock as of the close of business on November 13, 2020, and constitutes notice of the BFS stockholder meeting in conformity with the requirements of the DGCL.

This joint proxy statement/prospectus is being provided to BFS stockholders as part of a solicitation of proxies by the BFS board of directors for use at the BFS stockholder meeting and any adjournments or postponements thereof. BFS stockholders are encouraged to read this document carefully and in its entirety, including the annexes to and documents incorporated by reference into this joint proxy statement/prospectus, for more detailed information regarding the merger agreement and the transactions contemplated by the merger agreement.

Date, Time and Place of the BFS Stockholder Meeting

The BFS stockholder meeting is scheduled to be held at the corporate headquarters of Builders FirstSource, Inc., located at 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, on December 22, 2020, beginning at 9:00 a.m., Central Time, unless postponed to a later date.

In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, the BFS board of directors determines to hold the BFS stockholder meeting virtually in addition to, or in lieu of, holding the BFS stockholder meeting in person, Builders FirstSource will announce that fact as promptly as practicable after making such determination, and details on how to participate will be made available in the press release announcing such determination and will also be posted on the Builders FirstSource website at http://investors.bldr.com/press-releases.

Matters to be Considered at the BFS Stockholder Meeting

The purposes of the BFS stockholder meeting are as follows, each as further described in this joint proxy statement/prospectus:

 

   

BFS share issuance proposal. To approve the issuance of shares of BFS common stock to the stockholders of BMC pursuant to the merger agreement.

 

   

BFS charter amendment proposal. To adopt an amendment to the BFS charter to increase the number of authorized shares of BFS common stock.

 

   

BFS adjournment proposal. To approve the adjournment of the BFS stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BFS stockholder meeting, there are not sufficient votes to approve the BFS share issuance proposal or the BFS charter amendment proposal, or if Builders FirstSource is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to BFS stockholders.

Recommendation of the BFS Board of Directors

The BFS board of directors unanimously recommends that BFS stockholders vote:

 

   

FOR” the BFS share issuance proposal;

 

   

FOR” the BFS charter amendment proposal; and

 

   

FOR” the BFS adjournment proposal.

After careful consideration, the BFS board of directors unanimously authorized and approved and declared advisable the merger agreement and the completion of the merger, the BFS share issuance, and the other

 

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transactions contemplated by the merger agreement, subject to approval of the BFS share issuance by BFS stockholders at the BFS stockholder meeting; approved and adopted the BFS charter amendment, subject to approval of the BFS share issuance and adoption of the BFS charter amendment by BFS stockholders at the BFS stockholder meeting; and recommended that the BFS stockholders approve the BFS share issuance and adopt the BFS charter amendment.

Please see the section entitled “The Merger—Recommendation of the BFS Board of Directors; Builders FirstSource’s Reasons for the Merger” beginning on page 99.

BFS Record Date; Voting Rights

The BFS record date to determine who is entitled to receive notice of, and to vote at, the BFS stockholder meeting or any adjournments or postponements thereof is November 13, 2020. As of the close of business on the BFS record date, there were 116,821,189 shares of BFS common stock issued and outstanding, each entitled to vote at the BFS stockholder meeting. For any matter properly brought before the BFS stockholder meeting, each BFS stockholder may cast one vote for each share of BFS common stock owned at the close of business on the BFS record date. Only BFS stockholders of record at the close of business on the BFS record date are entitled to receive notice of, and to vote at, the BFS stockholder meeting and any adjournments or postponements thereof.

Quorum; Abstentions; Broker Non-Votes

A quorum of BFS stockholders is necessary to conduct the BFS stockholder meeting. The holders of a majority of the shares of BFS common stock entitled to vote at the meeting must be represented (in person or by proxy) at the BFS stockholder meeting (or any adjournment or postponement thereof) in order to constitute a quorum. If a quorum is not present, the BFS stockholder meeting will be adjourned and reconvened when the holders of the number of shares of BFS common stock required to constitute a quorum attend.

If you hold your Builders FirstSource shares in a stock brokerage account or if your shares are held by a bank, broker, or other nominee in “street name,” your shares will not be represented and your shares will not be voted on any matter unless you provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your bank, broker, or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to Builders FirstSource or by voting in person at the BFS stockholder meeting unless you have a “legal proxy,” which you must obtain from your bank or broker. Further, brokers who hold shares of BFS common stock on behalf of their customers will not be permitted to give a proxy to Builders FirstSource to vote those shares without specific instructions from their customers. If you are a BFS stockholder and you do not instruct your broker on how to vote your shares: (i) your broker will not be permitted to vote your shares on the proposal to approve the issuance of shares of BFS common stock to BMC stockholders pursuant to the merger, which will have no effect on the vote on this proposal, assuming a quorum is present; (ii) your broker will not be permitted to vote your shares on the proposal to adopt an amendment to Builders FirstSource’s certificate of incorporation, which will have the same effect as a vote “AGAINST” this proposal; and (iii) your broker will not be permitted to vote your shares on any proposal to approve any motion to adjourn the BFS stockholder meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the issuance of shares of BFS common stock to BMC stockholders pursuant to the merger or the adoption of an amendment to the BFS charter, which will have no effect on the vote on this proposal.

If you submit a properly executed proxy card, even if you abstain from voting or vote against the approval of the BFS share issuance or the adoption of the BFS charter amendment, your shares of BFS common stock will be counted for purposes of calculating whether a quorum is present at the BFS stockholder meeting. Executed but unvoted proxies will be voted in accordance with the recommendations of the BFS board of directors. If additional votes must be solicited to approve the BFS share issuance or adopt the BFS charter amendment, it is expected that the meeting will be adjourned to solicit additional proxies.

 

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Required Votes; Vote of Builders FirstSource’s Directors and Executive Officers

Except for the BFS adjournment proposal, the vote required to approve all of the proposals listed herein assumes the presence of a quorum.

 

Proposal          Votes Necessary
BFS Proposal 1    BFS Share Issuance Proposal    Approval requires the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting.
      An abstention (either by attending the BFS stockholder meeting in person and abstaining from voting or responding by proxy with an “abstention” vote) will have the same effect as a vote “AGAINST” the BFS share issuance proposal, while a broker non-vote, if any, or other failure of a BFS stockholder who does not attend the BFS stockholder meeting in person to vote will have no effect on the vote of this proposal.
BFS Proposal 2    BFS Charter Amendment Proposal    Approval requires the affirmative vote of a majority of the outstanding shares of BFS common stock entitled to vote on such proposal. An abstention, a broker non-vote, if any, or other failure to vote will have the same effect as a vote “AGAINST” the BFS charter amendment proposal.
BFS Proposal 3    BFS Adjournment Proposal   

Approval requires the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting.

 

An abstention (either by attending the BFS stockholder meeting in person and abstaining from voting or responding by proxy with an “abstention” vote) will have the same effect as a vote “AGAINST” the BFS adjournment proposal, while a broker non-vote, if any, or other failure of a BFS stockholder who does not attend the BFS stockholder meeting in person to vote will have no effect on the vote of this proposal.

As of the BFS record date, Builders FirstSource’s directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 1,929,075 shares of BFS common stock, or approximately 1.7% of the total outstanding shares of BFS common stock. Although none of them has entered into any agreement obligating them to do so, Builders FirstSource currently expects that all of its directors and executive officers will vote their shares “FOR” the BFS share issuance proposal, “FOR” the BFS charter amendment proposal, and “FOR” the BFS adjournment proposal. Please see the section entitled “Interests of Builders FirstSources Directors and Executive Officers in the Merger” beginning on page 176 and the arrangements described in Builders FirstSource’s Definitive Proxy Statement on Schedule 14A for Builders FirstSource’s 2020 Annual Meeting filed with the SEC on April 28, 2020, which is incorporated by reference into this joint proxy statement/prospectus.

Methods of Voting

If you are a stockholder of record as of the BFS record date, you may vote by proxy through the Internet, by telephone, or by mail, or you may vote in person at the BFS stockholder meeting.

 

   

By Internet: Through the Internet, by logging into the website indicated on the enclosed proxy card and following the prompts using the control number located on the proxy card.

 

   

By Telephone: By calling (from the United States, Puerto Rico, or Canada) using the toll-free telephone number listed on the enclosed proxy card.

 

   

By Mail: By completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

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In Person: Shares held directly in your name as stockholder of record may be voted in person at the BFS stockholder meeting. If you choose to vote your shares in person at the BFS stockholder meeting, please bring your enclosed proxy card and current, government-issued photo identification. Even if you plan to attend the BFS stockholder meeting, Builders FirstSource recommends that you submit a proxy to vote your shares in advance as described in this section so that your vote will be counted if you cannot or you later decide not to attend the BFS stockholder meeting. Shares held in “street name” may be voted in person by you only if you obtain a signed legal proxy from your bank, broker, or other nominee giving you the right to vote the shares. In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, the BFS board of directors determines to hold the BFS stockholder meeting virtually in addition to, or in lieu of, holding the BFS stockholder meeting in person, BFS stockholders can attend the BFS stockholder meeting online via live audio-only webcast, where BFS stockholders may vote and submit questions during the BFS stockholder meeting webcast.

If you are a stockholder of record, proxies submitted over the Internet or by telephone as described above must be received by the conclusion of the stockholder vote at the BFS stockholder meeting, and proxies submitted by mail as described above must be received by 11:59 p.m., Central Time, on December 21, 2020. To reduce administrative costs and help the environment by conserving natural resources, Builders FirstSource recommends that you submit a proxy to vote through the Internet, which is available 24 hours a day, seven days a week.

Notwithstanding the above, if your shares are held in “street name” by a bank, broker, or other nominee, you should follow the instructions you receive from your bank, broker, or other nominee on how to vote your shares.

Revocability of Proxies

Any stockholder giving a proxy has the right to revoke such proxy before it is voted at the BFS stockholder meeting (or any adjournment or postponement thereof) by any of the following actions:

 

   

sending a signed written notice that you revoke your proxy to Builders FirstSource’s corporate secretary, bearing a later date than your original proxy and mailing it so that it is received prior to the BFS stockholder meeting;

 

   

subsequently submitting a new proxy (including by submitting a proxy via the Internet or telephone) at a later date than your original proxy so that the new proxy is received by the deadline specified on the accompanying proxy card;

 

   

calling (866) 490-6854 and following the recorded instructions to revoke and replace such proxy; or

 

   

voting in person at the BFS stockholder meeting, which will automatically cancel any proxy previously given, or revoking your proxy in person at the BFS stockholder meeting.

Execution or revocation of a proxy will not in any way affect the stockholder’s right to attend the stockholder meeting and vote in person.

Written notices of revocation and other communications with respect to the revocation of proxies should be addressed to:

 

Builders FirstSource, Inc.
Attention: Corporate Secretary
2001 Bryan Street, Suite 1600
Dallas, Texas 75201

If your shares are held in “street name” and you previously provided voting instructions to your bank, broker, or other nominee, you should follow the instructions provided by your bank, broker, or other nominee to revoke or change your voting instructions.

 

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Unless revoked, all proxies representing shares entitled to vote that are delivered pursuant to this solicitation will be voted at the BFS stockholder meeting (or any adjournment or postponement thereof) and, where a choice has been specified on the proxy card, will be voted in accordance with such specification. If a BFS stockholder makes no specification on his, her or its proxy card as to how such BFS stockholder should want his, her or its shares of BFS common stock voted, such proxy will be voted as recommended by the BFS board of directors as stated in this joint proxy statement/prospectus, specifically “FOR” the BFS share issuance proposal, “FOR” the BFS charter amendment proposal, and “FOR” the BFS adjournment proposal.

Proxy Solicitation Costs

Builders FirstSource is soliciting proxies to provide an opportunity to all BFS stockholders to vote on agenda items at the BFS stockholder meeting, whether or not the stockholders are able to attend the BFS stockholder meeting (or any adjournment or postponement thereof). Builders FirstSource will bear the entire cost of soliciting proxies from its stockholders.

Builders FirstSource has retained Morrow Sodali to assist in the solicitation process. Builders FirstSource will pay Morrow Sodali a fee of approximately $15,000, plus costs and expenses for its assistance in the solicitation process. Builders FirstSource also has agreed to indemnify Morrow Sodali against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions). Builders FirstSource will also ask banks, brokers, and other nominees to forward the proxy solicitation materials to the beneficial owners of shares of BFS common stock held of record by such nominee holders, and Builders FirstSource may be required to reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners. In addition, Builders FirstSource’s directors, officers and other employees may solicit proxies in person, by telephone, electronically, by mail, or by other means, and will not be specifically compensated for such solicitations.

Attending the BFS Stockholder Meeting

You are entitled to attend the BFS stockholder meeting only if you are a stockholder of record of Builders FirstSource at the close of business on November 13, 2020, the BFS record date, or you hold your shares of Builders FirstSource beneficially in the name of a bank, broker, or other nominee as of the BFS record date, or if you hold a valid proxy for the BFS stockholder meeting.

If you are a stockholder of record of Builders FirstSource at the close of business on November 13, 2020 and wish to attend the BFS stockholder meeting, please so indicate on the appropriate proxy card or as prompted by the Internet or telephone voting system. Your name will be verified against the list of stockholders of record prior to your being admitted to the BFS stockholder meeting.

If a broker, bank, or other nominee is the record owner of your shares of BFS common stock, you will need to have proof that you are the beneficial owner as of the BFS record date to be admitted to the BFS stockholder meeting. A recent statement or letter from your broker, bank, or other nominee confirming your ownership as of the BFS record date, or presentation of a valid proxy from a broker, bank, or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.

You should be prepared to present current, government-issued photo identification for admittance. If you do not provide current, government-issued photo identification or comply with the other procedures outlined above upon request, you might not be admitted to the BFS stockholder meeting.

In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, the BFS board of directors determines to hold the BFS stockholder meeting virtually in addition to, or in lieu of, holding the BFS stockholder meeting in person, the BFS stockholder meeting will be held online via live audio-only webcast, where you, by logging into to the website, will be able to vote your shares and submit questions during the BFS stockholder meeting webcast.

 

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Householding

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy the delivery requirements for proxy statements and notices with respect to two or more stockholders sharing the same address by delivering a single proxy statement or a single notice addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and provides cost savings for companies.

As permitted by the Exchange Act, only one copy of this joint proxy statement/prospectus is being delivered to BFS stockholders residing at the same address, unless such stockholders have notified Builders FirstSource of their desire to receive multiple copies of the joint proxy statement/prospectus. In addition, some brokers household proxy materials, delivering a single proxy statement or notice to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or notice, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker or, as applicable, notify Builders FirstSource by writing to: Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201 or by calling (214)-880-3500.

You can request prompt delivery of a copy of this joint proxy statement/prospectus by writing to: Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, or by calling (214) 880-3500.

Tabulation of Votes; Results of the BFS Stockholder Meeting

Representatives of Mediant Communications Inc., or such other person that the chief executive officer of Builders FirstSource appoints in its place, will tabulate the votes and will act as inspector of election at the BFS stockholder meeting. The inspector of election will, among other matters, determine the number of shares of BFS common stock represented (in person or by proxy) at the BFS stockholder meeting (or any adjournment or postponement thereof) to confirm the existence of a quorum, determine the validity of all proxies and ballots and certify the results of voting on all proposals submitted to BFS stockholders.

The preliminary voting results will be announced at the BFS stockholder meeting. In addition, within four business days following the BFS stockholder meeting, Builders FirstSource intends to file the final voting results of the BFS stockholder meeting with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four-business day period, Builders FirstSource will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four days of the date that the final results are certified.

Adjournments

If a quorum is present at the BFS stockholder meeting (or any adjournment or postponement thereof) but there are not sufficient votes within three (3) business days prior to the date of the BFS stockholder meeting to approve the BFS share issuance proposal or the BFS charter amendment proposal, or if Builders FirstSource is otherwise required to do so pursuant to the merger agreement, then BFS stockholders may be asked to vote on the BFS adjournment proposal.

At any subsequent reconvening of the BFS stockholder meeting at which a quorum is present, any business may be transacted that might have been transacted at the original meeting and all proxies will be voted in the same manner as they would have been voted at the original convening of the BFS stockholder meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.

 

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Assistance

If you need assistance voting or in completing your proxy card or have questions regarding the BFS stockholder meeting, please contact Morrow Sodali, the proxy solicitation agent for Builders FirstSource at:

 

Morrow Sodali LLC
509 Madison Avenue, Suite 1206
New York, New York 10022
Stockholders may call toll-free: (800) 662-5200

BFS STOCKHOLDERS SHOULD READ THIS JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY AND IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, THE BFS SHARE ISSUANCE, AND THE BFS CHARTER AMENDMENT. IN PARTICULAR, BFS STOCKHOLDERS ARE DIRECTED TO THE MERGER AGREEMENT, WHICH IS ATTACHED AS ANNEX A TO THIS JOINT PROXY STATEMENT/PROSPECTUS.

 

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BFS PROPOSAL 1—BFS SHARE ISSUANCE PROPOSAL

This joint proxy statement/prospectus is being furnished to you as a stockholder of Builders FirstSource as part of the solicitation of proxies by the BFS board of directors for use at the BFS stockholder meeting to consider and vote, among other things, upon a proposal to approve the issuance of shares of BFS common stock to BMC stockholders pursuant to the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus.

Companies listed on Nasdaq, as Builders FirstSource is, must comply with a series of rules adopted by Nasdaq in order to remain listed. Under one of those rules, stockholder approval is required prior to the issuance of shares of common stock in any transaction or series of related transactions if the number of shares of common stock to be issued is equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the shares of common stock pursuant to the transaction. If the merger is completed, it is currently expected that the issuance of shares of BFS common stock to BMC stockholders pursuant to the merger agreement will exceed 20% of the number of shares of BFS common stock outstanding prior to the BFS share issuance, and, for this reason, Builders FirstSource is seeking the approval of its stockholders for the issuance of shares of BFS common stock pursuant to the merger agreement.

Approval of the BFS share issuance is a condition to the completion of the merger. Additionally, the completion of the merger is conditioned on the approval of the adoption of the BFS charter amendment set forth in BFS Proposal 2. Notwithstanding the outcome of the vote on this proposal, the BFS board of directors will not issue shares of BFS common stock to BMC stockholders pursuant to the merger agreement if the BFS charter amendment proposal is not approved by BFS stockholders.

The BFS board of directors unanimously recommends that BFS stockholders approve the following resolution:

“RESOLVED, that the stockholders of Builders FirstSource, Inc. hereby approve the issuance of shares of Builders FirstSource, Inc. common stock to BMC Stock Holdings, Inc. in connection with consummation of the transactions contemplated by, and pursuant to and in accordance with the terms of, that certain Agreement and Plan of Merger, dated as of August 26, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among Builders FirstSource, Inc., Boston Merger Sub I Inc., and BMC Stock Holdings, Inc., the exact number of shares of Builders FirstSource, Inc. common stock issued to be determined in accordance with the provisions of the Merger Agreement”

Approval of the BFS share issuance proposal requires the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting (or any adjournment or postponement thereof). A stockholder’s abstention from voting (either by attending the BFS stockholder meeting in person and abstaining from voting or responding by proxy with an “abstention” vote) will have the same effect as a vote “AGAINST” the BFS share issuance proposal, while a broker non-vote, if any, or other failure of a BFS stockholder who does not attend the BFS stockholder meeting in person to vote (including a failure to instruct your bank, broker, or other nominee to vote) will have no effect on the proposal, assuming a quorum is present.

 

 

IF YOU ARE A BFS STOCKHOLDER, THE BFS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE BFS SHARE ISSUANCE PROPOSAL

 

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BFS PROPOSAL 2—BFS CHARTER AMENDMENT PROPOSAL

The BFS board of directors has authorized and approved and declared advisable, pursuant to the merger agreement, the adoption of a certificate of amendment to the BFS charter, the full text of which is attached as Annex B to this joint proxy statement/prospectus. BFS stockholders should read the charter amendment in its entirety. The charter amendment amends the certificate of incorporation of Builders FirstSource to increase the authorized shares of BFS common stock from 200,000,000 shares of BFS common stock to 300,000,000 shares of BFS common stock, by replacing that reference to “200,000,000” in the first full paragraph of Article FOURTH of the current BFS charter with “300,000,000.”

On August 26, 2020, the BFS board of directors acted unanimously to approve and adopt the charter amendment and to recommend to the BFS stockholders that they approve the adoption of the charter amendment, subject to completion of the merger. Under the DGCL, Builders FirstSource is required to obtain approval from the BFS stockholders to amend the BFS charter to increase the number of shares of BFS common stock authorized for issuance. If the BFS charter amendment is approved by the BFS stockholders at the BFS stockholder meeting, the BFS charter amendment will be effective upon the filing of a certificate of amendment to the BFS charter setting forth such amendment with the Secretary of State of the State of Delaware (or at such later time as may be specified therein). Such filing is expected to occur immediately prior to the completion of the merger.

The adoption by BFS stockholders of an amendment to the BFS charter to increase the authorized shares of BFS common stock from 200,000,000 shares of BFS common stock to 300,000,000 shares of BFS common stock is required in order to complete the merger. However, if the BFS charter amendment is approved but the BFS share issuance proposal is not approved, the BFS board of directors will abandon the BFS charter amendment and the authorized shares of BFS common stock will remain at 200,000,000 shares of BFS common stock, without further action by BFS stockholders.

The BFS board of directors unanimously recommends that BFS stockholders adopt the certificate of amendment to the BFS charter to increase the authorized shares of BFS common stock from 200,000,000 shares of BFS common stock to 300,000,000 shares of BFS common stock.

Approval of the BFS charter amendment proposal requires the affirmative vote of a majority of the outstanding shares of BFS common stock entitled to vote on such proposal. A failure to vote (including a failure to instruct your bank, broker, or other nominee to vote), a broker non-vote, if any, or an abstention will have the same effect as a vote “AGAINST” the BFS charter amendment proposal.

 

 

IF YOU ARE A BFS STOCKHOLDER, THE BFS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE BFS CHARTER AMENDMENT PROPOSAL

 

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BFS PROPOSAL 3—BFS ADJOURNMENT PROPOSAL

The BFS stockholder meeting may be adjourned to another time and place if necessary to permit solicitation of additional proxies if there are not sufficient votes to approve the BFS share issuance proposal (BFS Proposal 1) or the BFS charter amendment proposal (BFS Proposal 2) or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to the BFS stockholders.

Builders FirstSource is asking its stockholders to authorize the holder of any proxy solicited by the BFS board of directors to vote in favor of any adjournment to the BFS stockholder meeting to solicit additional proxies if there are not sufficient votes to approve the BFS share issuance proposal or the BFS charter amendment proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to BFS stockholders.

The BFS board of directors unanimously recommends that BFS stockholders approve the proposal to adjourn the BFS stockholder meeting, if necessary.

Whether or not there is a quorum, approval of the BFS adjournment proposal requires the affirmative vote of the holders of a majority of the total number of shares of BFS common stock represented (in person or by proxy) and entitled to vote at the BFS stockholder meeting. A stockholder’s abstention from voting (either by attending the BFS stockholder meeting in person and abstaining from voting or responding by proxy with an “abstention” vote) will have the same effect as a vote “AGAINST” the BFS adjournment proposal, while a broker non-vote, if any, or other failure of a BFS stockholder who does not attend the BFS stockholder meeting in person to vote (including a failure to instruct your bank, broker, or other nominee to vote) will have no effect on the outcome of the proposal.

 

 

IF YOU ARE A BFS STOCKHOLDER, THE BFS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE BFS ADJOURNMENT PROPOSAL

 

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THE BMC STOCKHOLDER MEETING

This joint proxy statement/prospectus is being mailed on or about November 18, 2020, to holders of record of BMC common stock as of the close of business on November 13, 2020, and constitutes notice of the BMC stockholder meeting in conformity with the requirements of the DGCL.

This joint proxy statement/prospectus is being provided to BMC stockholders as part of a solicitation of proxies by the BMC board of directors for use at the BMC stockholder meeting and any adjournments or postponements thereof. BMC stockholders are encouraged to read this document carefully and in its entirety, including the annexes to and documents incorporated by reference into this joint proxy statement/prospectus, for more detailed information regarding the merger agreement and the transactions contemplated by the merger agreement.

Date, Time and Place of the BMC Stockholder Meeting

The BMC stockholder meeting is scheduled to be held at the Embassy Suites, 8001 Arco Corporate Drive, Raleigh, North Carolina 27617, on December 22, 2020, beginning at 10:00 a.m., Eastern Time, unless postponed to a later date.

In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, the BMC board of directors determines to hold the BMC stockholder meeting virtually in addition to, or in lieu of, holding the BMC stockholder meeting in person, BMC will announce that fact as promptly as practicable after making this determination, and details on how to participate will be made available in the press release announcing such determination and will also be posted on the BMC website at ir.buildwithbmc.com.

Matters to be Considered at the BMC Stockholder Meeting

The purposes of the BMC stockholder meeting are as follows, each as further described in this joint proxy statement/prospectus:

 

   

BMC merger agreement proposal. To adopt the merger agreement.

 

   

BMC compensation proposal. To approve, on an advisory (non-binding) basis, the BMC compensation proposal.

 

   

BMC adjournment proposal. To approve the adjournment of the BMC stockholder meeting to solicit additional proxies if, within three business days prior to the date of the BMC stockholder meeting, there are not sufficient votes to approve the BMC merger agreement proposal, or if BMC is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to BMC stockholders.

Recommendation of the BMC Board of Directors

The BMC board of directors unanimously recommends that BMC stockholders vote:

 

   

FOR” the BMC merger agreement proposal;

 

   

FOR” the BMC compensation proposal; and

 

   

FOR” the BMC adjournment proposal.

After careful consideration, at a special meeting held on August 26, 2020, the BMC board of directors unanimously approved and declared advisable the merger agreement and the completion of the merger and the other transactions contemplated thereby and determined that the terms thereof, the merger and the other transactions contemplated thereby are fair to, and in the best interests of, BMC and its stockholders and recommended to the stockholders of BMC that they adopt the merger agreement.

 

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Please see the section entitled “The Merger—Recommendation of the BMC Board of Directors; BMC’s Reasons for the Merger” beginning on page 104.

BMC Record Date; Voting Rights

The BMC record date to determine who is entitled to receive notice of, and to vote at, the BMC stockholder meeting or any adjournments or postponements thereof is November 13, 2020. As of the close of business on the BMC record date, there were 67,283,930 shares of BMC common stock issued and outstanding, each entitled to vote at the BMC stockholder meeting. For any matter properly brought before the BMC stockholder meeting, each BMC stockholder may cast one vote for each share of BMC common stock owned at the close of business on the BMC record date. Only BMC stockholders of record at the close of business on the BMC record date are entitled to receive notice of, and to vote at, the BMC stockholder meeting and any adjournments or postponements thereof.

Quorum; Abstentions; Broker Non-Votes

A quorum of BMC stockholders is necessary to conduct the BMC stockholder meeting. The holders of a majority of the shares of BMC common stock entitled to vote at the meeting must be represented (in person or by proxy) at the BMC stockholder meeting (or any adjournment or postponement thereof) in order to constitute a quorum. If a quorum is not present, the BMC stockholder meeting will be adjourned and reconvened when the holders of the number of shares of BMC common stock required to constitute a quorum attend.

If you hold your BMC shares in a stock brokerage account or if your shares are held by a bank, broker, or other nominee in “street name,” your shares will not be represented and your shares will not be voted on any matter unless you provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your bank, broker, or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to BMC or by voting in person at the BMC stockholder meeting unless you have a “legal proxy,” which you must obtain from your bank or broker. Further, brokers who hold shares of BMC common stock on behalf of their customers will not be permitted to give a proxy to BMC to vote those shares without specific instructions from their customers. If you are a BMC stockholder and you do not instruct your broker on how to vote your shares: (i) your broker will not be permitted to vote your shares on the proposal to adopt the merger agreement, which will have the same effect as a vote “AGAINST” this proposal; (ii) your broker will not be permitted to vote your shares on the proposal to approve the BMC compensation proposal, which will have no effect on the vote on this proposal, assuming a quorum is present; and (iii) your broker will not be permitted to vote your shares on any proposal to approve any motion to adjourn the BMC stockholder meeting if, within three business days prior to the BMC stockholder meeting, there are not sufficient votes to approve the BMC merger agreement proposal, or if BMC is otherwise required or permitted to do so pursuant to the merger agreement, or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to the BMC stockholders, which will have no effect on the vote on this proposal.

If you submit a properly executed proxy card, even if you abstain from voting or vote against the adoption of the merger agreement or the BMC compensation proposal, your shares of BMC common stock will be counted for purposes of calculating whether a quorum is present at the BMC stockholder meeting. Executed but unvoted proxies will be voted in accordance with the recommendations of the BMC board of directors. If additional votes must be solicited to adopt the merger agreement, it is expected that the meeting will be adjourned to solicit additional proxies.

Required Votes; Vote of BMC’s Directors and Executive Officers

Except for the BMC adjournment proposal, the vote required to approve all of the proposals listed herein assumes the presence of a quorum.

 

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Proposal          Votes Necessary

BMC

Proposal 1

   BMC Merger Agreement Proposal   

Approval requires the affirmative vote of a majority of the outstanding shares of BMC common stock entitled to vote on such proposal.

 

An abstention, a broker non-vote, if any, or other failure to vote will have the same effect as a vote “AGAINST” the BMC merger agreement proposal.

BMC

Proposal 2

   BMC Compensation Proposal   

Approval requires the affirmative vote of the holders of a majority of the shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting and entitled to vote on the proposal.

 

An abstention will have the same effect as a vote “AGAINST” the BMC compensation proposal, while a broker non-vote, if any, or other failure to vote will have no effect on the vote of this proposal.

BMC

Proposal 3

   BMC Adjournment Proposal   

Approval requires the affirmative vote of the holders of a majority of the shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting and entitled to vote on the proposal.

 

An abstention will have the same effect as a vote “AGAINST” the BMC adjournment proposal, while a broker non-vote, if any, or other failure to vote will have no effect on the vote of this proposal.

As of the BMC record date, BMC’s directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 427,188 shares of BMC common stock, or approximately 0.63% of the total outstanding shares of BMC common stock. Although none of them has entered into any agreement obligating them to do so, BMC currently expects that all of its directors and executive officers will vote their shares “FOR” the BMC merger agreement proposal, “FOR” the BMC compensation proposal, and “FOR” the BMC adjournment proposal. Please see the section entitled “Interests of BMC’s Directors and Executive Officers in the Merger” beginning on page 178 and the arrangements described in BMC’s Definitive Proxy Statement on Schedule 14A for BMC’s 2020 Annual Meeting filed with the SEC on March  27, 2020, which is incorporated by reference into this joint proxy statement/prospectus.

Methods of Voting

If you are a stockholder of record as of the BMC record date, you may vote by proxy through the Internet, by telephone, or by mail, or you may vote in person at the BMC stockholder meeting.

 

   

By Internet: Through the Internet, by logging into the website indicated on the enclosed proxy card and following the prompts using the control number located on the proxy card.

 

   

By Telephone: By calling (from the United States, Puerto Rico, or Canada) using the toll-free telephone number listed on the enclosed proxy card.

 

   

By Mail: By completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

   

In Person: Shares held directly in your name as stockholder of record may be voted in person at the BMC stockholder meeting. If you choose to vote your shares in person at the BMC stockholder meeting, please bring your enclosed proxy card and current, government-issued photo identification. Even if you plan to attend the BMC stockholder meeting, BMC recommends that you submit a proxy to vote your shares in advance as described in this section so that your vote will be counted if you cannot or you later decide not to attend the BMC stockholder meeting. Shares held in “street name” may be voted in person by you only if you obtain a signed legal proxy from your bank, broker, or other

 

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nominee giving you the right to vote the shares. In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, the BMC board of directors determines to hold the BMC stockholder meeting virtually in addition to, or in lieu of, holding the BMC stockholder meeting in person, BMC stockholders can attend the BMC stockholder meeting online via live audio-only webcast, where BMC stockholders, by logging into the website, may vote and submit questions during the BMC stockholder meeting webcast.

If you are a stockholder of record, proxies submitted over the Internet, by telephone or by mail as described above must be received by 11:59 p.m., Eastern Time, on December 21, 2020. To reduce administrative costs and help the environment by conserving natural resources, BMC recommends that you submit a proxy to vote through the Internet, which is available 24 hours a day, seven days a week.

Notwithstanding the above, if your shares are held in “street name” by a bank, broker, or other nominee, you should follow the instructions you receive from your bank, broker, or other nominee on how to vote your shares.

Revocability of Proxies

Any stockholder giving a proxy has the right to revoke such proxy before it is voted at the BMC stockholder meeting (or any adjournment or postponement thereof) by any of the following actions:

 

   

sending a signed written notice that you revoke your proxy to BMC’s corporate secretary, bearing a later date than your original proxy and mailing it so that it is received prior to the BMC stockholder meeting;

 

   

subsequently submitting a new proxy (including by submitting a proxy via the Internet or telephone) at a later date than your original proxy so that the new proxy is received by the deadline specified on the accompanying proxy card;

 

   

calling (919) 431-1000 and following the recorded instructions; or

 

   

voting in person at the BMC stockholder meeting, which will automatically cancel any proxy previously given, or revoking your proxy in person at the BMC stockholder meeting.

Execution or revocation of a proxy will not in any way affect the stockholder’s right to attend the BMC stockholder meeting and vote in person.

Written notices of revocation and other communications with respect to the revocation of proxies should be addressed to:

 

BMC Stock Holdings, Inc.
Attention: Corporate Secretary
4800 Falls of Neuse Road, Suite 400
Raleigh, North Carolina 27609
(919) 431-1000

If your shares are held in “street name” and you previously provided voting instructions to your broker, bank or other nominee, you should follow the instructions provided by your broker, bank, or other nominee to revoke or change your voting instructions.

Unless revoked, all proxies representing shares entitled to vote that are delivered pursuant to this solicitation will be voted at the BMC stockholder meeting (or any adjournment or postponement thereof) and, where a choice has been specified on the proxy card, will be voted in accordance with such specification. If a BMC stockholder makes no specification on his, her or its proxy card as to how such BMC stockholder should want his, her or its shares of BMC common stock voted, such proxy will be voted as recommended by the BMC board of directors as stated in this joint proxy statement/prospectus, specifically “FOR” the BMC merger agreement proposal, “FOR” the BMC compensation proposal, and “FOR” the BMC adjournment proposal.

 

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Proxy Solicitation Costs

BMC is soliciting proxies to provide an opportunity to all BMC stockholders to vote on agenda items at the BMC stockholder meeting, whether or not the stockholders are able to attend the BMC stockholder meeting (or any adjournment or postponement thereof). BMC will bear the entire cost of soliciting proxies from its stockholders.

BMC has retained Innisfree to assist in the solicitation process. BMC will pay Innisfree a fee of approximately $25,000, plus costs and reasonable expenses for its assistance in the solicitation process. BMC also has agreed to indemnify Innisfree against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions). BMC will also ask banks, brokers, and other nominees to forward the proxy solicitation materials to the beneficial owners of shares of BMC common stock held of record by such nominee holders, and BMC may be required to reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners. In addition, BMC’s directors, officers and other employees may solicit proxies in person, by telephone, electronically, by mail, or by other means, and will not be specifically compensated for such solicitations.

Attending the BMC Stockholder Meeting

You are entitled to attend the BMC stockholder meeting only if you are a stockholder of record of BMC at the close of business on November 13, 2020, the BMC record date, or you hold your shares of BMC beneficially in the name of a bank, broker, or other nominee as of the BMC record date, or if you hold a valid proxy for the BMC stockholder meeting.

If you are a stockholder of record of BMC at the close of business on November 13, 2020 and wish to attend the BMC stockholder meeting, please so indicate on the appropriate proxy card or as prompted by the Internet or telephone voting system. Your name will be verified against the list of stockholders of record prior to your being admitted to the BMC stockholder meeting.

If a broker, bank, or other nominee is the record owner of your shares of BMC common stock, you will need to have proof that you are the beneficial owner as of the BMC record date to be admitted to the BMC stockholder meeting. A recent statement or letter from your broker, bank, or other nominee confirming your ownership as of the BMC record date, or presentation of a valid proxy from a broker, bank, or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.

You should be prepared to present current, government-issued photo identification for admittance. If you do not provide current, government-issued photo identification or comply with the other procedures outlined above upon request, you might not be admitted to the BMC stockholder meeting.

In the event that, as a result of public health and travel concerns or recommendations that public health officials may issue in light of the COVID-19 pandemic, the BMC board of directors determines to hold the BMC stockholder meeting virtually in addition to, or in lieu of, holding the BMC stockholder meeting in person, the BMC stockholder meeting will be held online via live audio-only webcast, where you, by logging into the website, will be able to vote your shares and submit questions during the BMC stockholder meeting webcast.

Householding

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy the delivery requirements for proxy statements and notices with respect to two or more stockholders sharing the same address by delivering a single proxy statement or a single notice addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and provides cost savings for companies.

 

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As permitted by the Exchange Act, only one copy of this joint proxy statement/prospectus is being delivered to BMC stockholders residing at the same address, unless such stockholders have notified BMC of their desire to receive multiple copies of the joint proxy statement/prospectus. In addition, some brokers household proxy materials, delivering a single proxy statement or notice to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or notice, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify your broker or, as applicable, notify BMC by writing to: Investor Relations Department, BMC Stock Holdings, Inc., 4800 Falls of Neuse Road, Suite 400, Raleigh, North Carolina 27609 or by calling (919) 431-1000.

You can request prompt delivery of a copy of this joint proxy statement/prospectus by writing to: Investor Relations Department, the corporate headquarters of BMC Stock Holdings, Inc., 4800 Falls of Neuse Road, Suite 400, Raleigh, North Carolina 27609 or by calling (919) 431-1000.

Tabulation of Votes; Results of the BMC Stockholder Meeting

Representatives of Broadridge Financial Solutions, Inc., will tabulate the votes and will act as independent inspector of election at the BMC stockholder meeting. The inspector of election will, among other matters, determine the number of shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting (or any adjournment or postponement thereof) to confirm the existence of a quorum, determine the validity of all proxies and ballots and certify the results of voting on all proposals submitted to BMC stockholders.

The preliminary voting results will be announced at the BMC stockholder meeting. In addition, within four business days following the BMC stockholder meeting, BMC intends to file the final voting results of the BMC stockholder meeting with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four-business day period, BMC will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four days of the date that the final results are certified.

Adjournments

If a quorum is present at the BMC stockholder meeting (or any adjournment or postponement thereof) but, within three business days prior to the BMC stockholder meeting, there are not sufficient votes to approve the BMC merger agreement proposal, or if BMC is otherwise required or permitted to do so pursuant to the merger agreement, then BMC stockholders may be asked to vote on the BMC adjournment proposal.

At any subsequent reconvening of the BMC stockholder meeting at which a quorum is present, any business may be transacted that might have been transacted at the original meeting and all proxies will be voted in the same manner as they would have been voted at the original convening of the BMC stockholder meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.

 

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Assistance

If you need assistance voting or in completing your proxy card or have questions regarding the BMC stockholder meeting, please contact Innisfree, the proxy solicitation agent for BMC, at:

 

Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Stockholders may call toll-free: (877) 750-8166
Banks and brokers may call collect: (212) 750-5833

BMC STOCKHOLDERS SHOULD READ THIS JOINT PROXY STATEMENT/PROSPECTUS

CAREFULLY AND IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE

MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING

THE MERGER. IN PARTICULAR, BMC STOCKHOLDERS ARE DIRECTED TO THE MERGER

AGREEMENT, WHICH IS ATTACHED AS ANNEX A TO THIS JOINT PROXY

STATEMENT/PROSPECTUS.

 

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BMC PROPOSAL 1—BMC MERGER AGREEMENT PROPOSAL

This joint proxy statement/prospectus is being furnished to you as a stockholder of BMC as part of the solicitation of proxies by the BMC board of directors for use at the BMC stockholder meeting to consider and vote, among other things, upon a proposal to adopt the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus.

The BMC board of directors, after due and careful discussion and consideration, unanimously approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement and determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of BMC and its stockholders.

The BMC board of directors accordingly unanimously recommends that BMC stockholders adopt the merger agreement, as disclosed in this joint proxy statement/prospectus and particularly the related narrative disclosures in the sections entitled “The Merger” beginning on page 79 and “The Merger Agreement” beginning on page 136 and as attached as Annex A to this joint proxy statement/prospectus.

The merger cannot be completed without the affirmative vote of a majority of the outstanding shares of BMC common stock entitled to vote thereon. An abstention, a broker non-vote, if any, or other failure to vote will have the same effect as a vote “AGAINST” the BMC merger agreement proposal, assuming a quorum is present.

 

 

IF YOU ARE A BMC STOCKHOLDER, THE BMC BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE BMC MERGER AGREEMENT PROPOSAL

 

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BMC PROPOSAL 2—BMC COMPENSATION PROPOSAL

Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, BMC is seeking an advisory (non-binding) stockholder approval of the compensation of BMC’s named executive officers that is based on or otherwise relates to the merger as disclosed in the section entitled “Interests of BMC’s Directors and Executive Officers in the Merger—Quantification of Payments and Benefits to BMC’s Named Executive Officers in Connection with the Merger” beginning on page 183. The proposal gives BMC’s stockholders the opportunity to express their views on the merger-related compensation of BMC’s named executive officers.

Accordingly, BMC is asking BMC stockholders to vote “FOR” the adoption of the following resolution, on an advisory (non-binding) basis:

“RESOLVED, that the compensation that will or may be paid or become payable to named executive officers of BMC Stock Holdings, Inc. in connection with the merger, and the agreements or understandings pursuant to which such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “Interests of BMC’s Directors and Executive Officers in the Merger—Quantification of Payments and Benefits to BMC’s Named Executive Officers in Connection with the Merger” are hereby APPROVED.”

The vote on the BMC compensation proposal is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, if you are an BMC stockholder, you may vote to approve the BMC merger agreement proposal, and vote not to approve the BMC compensation proposal, and vice versa. If the merger is completed, the merger-related compensation may be paid to BMC’s named executive officers to the extent payable in accordance with the terms of the compensation agreements and arrangements even if BMC stockholders fail to approve the advisory vote regarding merger-related compensation.

Approval of the BMC compensation proposal requires the affirmative vote of the holders of a majority of the shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting and entitled to vote on the proposal. A stockholder’s abstention from voting will have the same effect as a vote “AGAINST” the BMC compensation proposal, while a broker non-vote, if any, or other failure to vote (including a failure to instruct your bank, broker, or other nominee to vote) will have no effect on the outcome of the proposal, assuming a quorum is present.

The BMC board of directors unanimously recommends a vote “FOR” the BMC compensation proposal.

 

 

IF YOU ARE A BMC STOCKHOLDER, THE BMC BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE BMC COMPENSATION PROPOSAL

 

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BMC PROPOSAL 3—BMC ADJOURNMENT PROPOSAL

The BMC stockholder meeting may be adjourned to another time and place if necessary to permit solicitation of additional proxies if there are not sufficient votes to approve the BMC merger agreement proposal (BMC Proposal 1) or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to the BMC stockholders.

BMC is asking its stockholders to authorize the holder of any proxy solicited by the BMC board of directors to vote in favor of any adjournment to the BMC stockholder meeting to solicit additional proxies if there are not sufficient votes to approve the BMC merger agreement proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to BMC stockholders.

The BMC board of directors unanimously recommends that BMC stockholders approve the proposal to adjourn the BMC stockholder meeting, if necessary.

Approval of the BMC adjournment proposal requires the affirmative vote of the holders of a majority of the shares of BMC common stock represented (in person or by proxy) at the BMC stockholder meeting and entitled to vote on the proposal. A stockholder’s abstention from voting will have the same effect as a vote “AGAINST” the BMC adjournment proposal, while a broker non-vote, if any, or other failure to vote (including a failure to instruct your bank, broker, or other nominee to vote) will have no effect on the outcome of the proposal.

 

 

IF YOU ARE A BMC STOCKHOLDER, THE BMC BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE BMC ADJOURNMENT PROPOSAL

 

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THE MERGER

The following is a description of the material aspects of the merger. While Builders FirstSource and BMC believe that the following description covers the material terms of the merger, the description may not contain all of the information that is important to you. You are encouraged to read carefully this entire joint proxy statement/prospectus, including the text of the merger agreement attached as Annex A to this joint proxy statement/prospectus, for a more complete understanding of the merger. In addition, important business and financial information about each of Builders FirstSource and BMC is included in or incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 213.

General

Builders FirstSource and BMC have entered into the merger agreement, which provides for the merger of Merger Sub, a Delaware corporation and a wholly owned subsidiary of Builders FirstSource, with and into BMC. As a result of the merger, the separate existence of Merger Sub will cease and BMC will continue its existence under the laws of the State of Delaware as the surviving corporation and a wholly owned subsidiary of Builders FirstSource.

Exchange Ratio

At the effective time, each share of BMC common stock (other than canceled shares) will be converted into the right to receive 1.3125 shares of BFS common stock.

No fractional shares of BFS common stock will be issued upon the conversion of shares of BMC common stock pursuant to the merger agreement. Following the effective time, the exchange agent will aggregate all fractional shares of BFS common stock that would otherwise have been required to be distributed pursuant to the merger agreement and cause them to be sold in round lots (to the extent practicable) on Nasdaq at the then-prevailing prices. Each holder of BMC common shares that otherwise would have been entitled to receive a fraction of a share of BFS common stock pursuant to the merger agreement will, in lieu thereof, be entitled to receive from the proceeds from such sales by the exchange agent, rounded to the nearest whole cent and without interest, an amount equal to such holder’s proportionate interest in the proceeds from such sales, based on the fractional shares of BFS common stock to which such holder would otherwise be entitled.

Builders FirstSource will issue a fixed number of shares of BFS common stock in exchange for each share of BMC common stock. As a result, the implied value of the merger consideration to be received by BMC stockholders will fluctuate based on any changes in the market price of BFS common stock prior to the completion of the merger. Accordingly, such implied value of the per share merger consideration to be received by BMC stockholders upon completion of the merger could be greater than, less than or the same as the implied value of the merger consideration on the date of this joint proxy statement/prospectus. We urge you to obtain current market quotations for the shares of BFS common stock and BMC common stock. BFS common stock and BMC common stock are listed on Nasdaq under the symbols “BLDR” and “BMCH,” respectively.

Background of the Merger

The BMC board of directors and BMC’s senior management regularly review and consider BMC’s performance, strategy, competitive position, opportunities and prospects of BMC in light of the then-current business and economic environments, as well as its long-term strategic plans and objectives, including business combinations, acquisitions, and other strategic opportunities. As part of this ongoing evaluation, the BMC board of directors, together with BMC’s senior management team and its outside advisors, have from time to time considered various potential opportunities to increase stockholder value.

 

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The BFS board of directors regularly evaluates, and discusses with Builders FirstSource’s senior management and outside advisors, various strategic and financial alternatives in light of developments in Builders FirstSource’s businesses, the industry in which it competes, financial markets and the economy generally, with a view towards strengthening Builders FirstSource’s businesses, financial performance and condition and increasing stockholder value.

The BFS board of directors, the BMC board of directors and the members of management of each company have been generally familiar with the other company and its financial performance and condition, management team and businesses. In that regard, from time to time over the years, Builders FirstSource and BMC have engaged in exploratory discussions regarding the possibility of a potential business combination, although such prior discussions did not result in any agreement to the terms and conditions of any such combination or the execution of any definitive agreements regarding any such combination.

In connection with the ongoing review by the BFS board of directors of potential strategic opportunities available to Builders FirstSource, Builders FirstSource retained Rothschild & Co as a financial advisor, effective as of March 29, 2018, which retention was subsequently supplemented to address a possible transaction with BMC.

On April 30, 2018, the BFS board of directors held a telephonic meeting, with members of Builders FirstSource management and representatives of Rothschild & Co in attendance, to discuss a potential transaction with BMC. Representatives of Rothschild & Co discussed certain financial aspects of such potential transaction. Following the discussion, the BFS board of directors indicated its support for members of the senior management to approach BMC to discuss a potential transaction between Builders FirstSource and BMC. Later that day, Mr. M. Chad Crow, the president and chief executive officer of Builders FirstSource, contacted Mr. David Keltner, then the interim president and chief executive officer of BMC, by telephone to discuss the merits of a potential transaction between the two companies.

On May 17, 2018, Mr. Crow sent Mr. Keltner a letter indicating his interest in meeting with Messrs. Keltner and David W. Bullock, then the chair of the BMC board of directors, to discuss the merits of exploring a potential transaction between Builders FirstSource and BMC.

On June 11, 2018, members of the BFS board of directors had a telephone call with members of Builders FirstSource management and representatives of Rothschild & Co to discuss, among other things, a potential transaction between Builders FirstSource and BMC. Representatives of Rothschild & Co reviewed certain preliminary financial information relating to a potential transaction between the two companies. Following discussion, there was consensus among members of the BFS board of directors to proceed with discussions between Builders FirstSource’s senior management and representatives of BMC regarding a potential transaction between Builders FirstSource and BMC.

On June 26, 2018, Messrs. Paul S. Levy, the chair of the BFS board of directors, and Crow met with Messrs. Bullock and Keltner in Chicago, Illinois. During the meeting, the representatives of Builders FirstSource and BMC shared, among other things, their respective perspectives regarding the industry in which Builders FirstSource and BMC operated and the potential benefits that could be achieved from a business combination of the two companies. The representatives of Builders FirstSource and BMC did not discuss any valuation-related matters or price ranges during the meeting. Messrs. Bullock and Keltner said that they would discuss the matter with the BMC board of directors.

On July 3, 2018, members of the BFS board of directors had a telephone call with members of Builders FirstSource management and representatives of Rothschild & Co to discuss, among other things, a potential transaction between Builders FirstSource and BMC. Representatives of Rothschild & Co then discussed certain preliminary financial information relating to a potential transaction between the two companies. Following discussion, the directors of Builders FirstSource participating in the call indicated continued support for

 

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discussions between Builders FirstSource’s senior management and representatives of BMC regarding a potential transaction between Builders FirstSource and BMC.

On July 6, 2018, Builders FirstSource sent Messrs. Bullock and Keltner a letter with a non-binding proposal to acquire BMC at a value of between $25.00 to $26.50 per share, in cash. The letter indicated, among other things, that Builders FirstSource was willing to consider a modest portion of the consideration that would be payable to BMC stockholders in BFS common stock. The letter requested a response by July 23, 2018.

On July 8, 2018, the BMC board of directors held a telephonic meeting, with members of BMC management and representatives of BMC’s legal counsel, Simpson Thacher & Bartlett LLP, which is referred to as Simpson Thacher, in attendance, to discuss, among other matters, Builders FirstSource’s July 6 proposal. At the meeting, the representatives of Simpson Thacher reviewed with the directors their fiduciary duties as they applied in the context of the consideration of the BMC board of directors of the July 6 proposal and certain other legal matters. The BMC board of directors then discussed the potential engagement of a financial advisor to assist the BMC board of directors in evaluating the July 6 proposal, as well as BMC’s other potential strategic alternatives. The BMC directors discussed their respective perspectives on financial advisors that BMC had retained or considered retaining in the past and the merits of interviewing multiple potential financial advisors. Following further discussion, the BMC board of directors determined not to contact multiple financial advisors given the risk of unintended disclosure of the July 6 proposal, and the BMC board of directors determined to contact Moelis because, among other things, a number of directors expressed a favorable view of Moelis due to its knowledge of the industry in which BMC operated and previous contacts and experience with BMC.

On July 12, 2018, the BMC board of directors held a telephonic meeting, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance. During the meeting, Mr. Bullock reported on his discussions with Moelis regarding a potential engagement and noted that the representatives of Moelis exhibited deep knowledge of BMC, as well as other companies in the industry and the mergers and acquisitions environment generally. Mr. Bullock also indicated that BMC management was in the process of negotiating an engagement letter with Moelis, and representatives of Simpson Thacher reported that representatives of Moelis confirmed that Moelis did not have, currently or in the last three years, significant business or other relationships with Builders FirstSource and that Moelis would provide a formal relationship disclosure letter to the BMC board of directors setting forth its relationships with BMC and Builders FirstSource. The representatives of Moelis then discussed with the BMC board of directors their preliminary perspectives regarding Builders FirstSource’s July 6 proposal.

On July 25, 2018, BMC entered into an engagement letter with Moelis to retain Moelis as financial advisor to assist BMC in connection with a potential sale of BMC or other business combination involving BMC.

On August 1, 2018, the BMC board of directors held a regularly scheduled meeting in Raleigh, North Carolina, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance, to discuss and consider, among other matters, Builders FirstSource’s July 6 proposal. The representatives of Simpson Thacher reviewed with the directors certain legal considerations and the directors’ fiduciary duties, including their application to the consideration by the BMC board of directors of the July 6 proposal. In connection with their review, the representatives of Simpson Thacher also referred to the Moelis relationship disclosure letter dated July 30, 2018. The representatives of Moelis reviewed the July 6 proposal with the BMC board of directors and discussed certain preliminary perspectives, including, among other things, the market environment in which BMC operated, historical and forward-looking housing starts in the U.S., historical share price performance, and publicly available analyst target share prices for BMC and Builders FirstSource. The representatives of Moelis discussed Moelis’ preliminary financial analyses of the July 6 proposal, including Moelis’ preliminary discounted cash flow analyses and the key assumptions underlying such analyses. The Moelis representatives then discussed with the BMC board of directors various potential strategic alternatives for BMC, including if BMC continued as a stand-alone company or if it engaged in a business combination or other transformative acquisition or sale of BMC. BMC also provided an overview of potential partners for a business

 

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combination and acquisition targets. Following discussion of the foregoing and other matters, the BMC board of directors concluded that the July 6 proposal undervalued BMC and directed Mr. Bullock, in consultation with Moelis and Simpson Thacher, to communicate BMC’s rejection of Builders FirstSource’s proposal without making any counterproposal or agreeing to negotiations based on the existing July 6 proposal.

On August 9, 2018, Mr. Bullock called Mr. Levy to inform him of the decision of the BMC board of directors. Mr. Bullock also thanked Mr. Levy and noted that he and BMC would consider the discussions closed and would return to conducting BMC’s business in the ordinary course.

After the termination of the parties’ discussions in August 2018, representatives of each of Builders FirstSource and BMC continued to interact in the ordinary course of business, including at industry conferences, as they had prior to their discussions in 2018. However, there were no substantive discussions between Builders FirstSource and BMC with respect to a potential transaction until January 2020.

On August 28, 2018, BMC announced that the BMC board of directors had completed its search for a new chief executive officer and appointed David E. Flitman as president and chief executive officer of BMC, which appointment became effective on September 26, 2018.

On September 18, 2018, the BMC board of directors elected Mr. Flitman to the BMC board of directors to serve as a Class II director, effective as of September 26, 2018.

From time to time beginning in 2019, representatives of each of BMC and Builders FirstSource separately received unsolicited communications from representatives of a stockholder of both companies in which such stockholder presented its views regarding the two companies and expressed its views regarding a potential strategic transaction between Builders FirstSource and BMC. None of these communications involved the disclosure of non-public information, including with respect to any potential business combination between the parties.

From August 2019 through mid-February 2020, BMC explored a potential cash-and-stock acquisition of a company in the lumber and building materials distribution industry, which company is referred to as Party X. In connection with its review of such potential transaction, the BMC board of directors formed a transaction committee, which is referred to as the BMC transaction committee, to enable a smaller group of directors to devote the requisite time and efforts to supervise and support management in connection with BMC’s review of the potential transaction with Party X. On September 6, 2019, BMC entered into an engagement letter with Moelis to retain Moelis as financial advisor to assist BMC in connection with the potential transaction with Party X.

On January 14, 2020, the BFS board of directors convened telephonically, with members of Builders FirstSource management in attendance, to discuss, among other things, available strategic alternatives for Builders FirstSource, including a potential business combination with BMC. Senior management of Builders FirstSource discussed with the BFS board of directors the potential benefits and strategic considerations involved in such a transaction, as well as certain financial information regarding such a transaction it had reviewed with Rothschild & Co. After further discussion, the BFS board of directors indicated its support for the management of Builders FirstSource to engage in discussions with representatives of BMC and to investigate and evaluate the benefits and risks of a potential transaction with BMC and report back to the BFS board of directors. Also on January 14, 2020, Builders FirstSource retained Morgan Stanley & Co. LLC, which is referred to as Morgan Stanley, as a financial advisor. In the two years prior to such date, Morgan Stanley and its affiliates had not received any fees for any financial advisory or financing services provided to either of BMC or Builders FirstSource or their respective affiliates.

Later on January 14, 2020, Mr. Levy telephoned Mr. Bullock and expressed an interest in discussing the merits of a potential transaction between BMC and Builders FirstSource. Mr. Levy suggested that he, Mr. Crow

 

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and Messrs. Bullock and Flitman meet to explore the possibility of a potential transaction between BMC and Builders FirstSource. Mr. Bullock informed the BMC board of directors via email of Mr. Levy’s telephone call, and the BMC board of directors determined that Messrs. Bullock and Flitman should meet with the representatives of Builders FirstSource to learn what Builders FirstSource was considering with respect to a potential transaction.

On January 31, 2020, the BFS board of directors held a telephonic meeting, with members of Builders FirstSource management in attendance, to discuss, among other things, a potential business combination with BMC. The BFS board of directors discussed with senior management the potential benefits and strategic considerations involved in such a transaction. Members of Builders FirstSource’s senior management shared their views of BMC’s businesses and the potential benefits to be gained by a business combination between Builders FirstSource and BMC. Following the discussion, the BFS board of directors indicated its support for the management of Builders FirstSource to present BMC with a non-binding proposal to engage in a business transaction, pursue further discussions with representatives of BMC and begin a due diligence investigation of BMC in order to evaluate the benefits and risks of a potential business combination with BMC.

On February 4, 2020, Messrs. Levy, Crow and Flitman met in New York, New York, and Mr. Bullock joined by telephone. At the meeting, Messrs. Levy and Crow expressed Builders FirstSource’s interest in engaging in discussions with BMC regarding a potential business combination of the two companies. Messrs. Levy and Crow also conveyed that, as had been publicly announced by Builders FirstSource on January 13, 2020, Mr. Crow intended to retire from his position as president and chief executive officer of Builders FirstSource during 2020 and that, if BMC and Builders FirstSource were to agree to enter into a potential business combination, the BFS board of directors would consider Mr. Flitman as a candidate to succeed Mr. Crow as president and chief executive officer of the combined company following a transition period after closing of such transaction.

On February 6, 2020, the BMC board of directors held a telephonic meeting, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance, to discuss, among other matters, the ongoing discussions with Party X and the possibility of exploring a potential business combination of BMC and Builders FirstSource. The representatives of Simpson Thacher provided a review of certain legal considerations, including a review of, among other legal matters, the fiduciary duties of directors as applied in the context of the consideration of both transactions. At the meeting, Mr. Bullock provided the BMC board of directors with a summary of the February 4 meeting with Messrs. Levy and Crow and reported, among other things, that Builders FirstSource appeared to be interested in exploring a potential business transaction with BMC. The BMC board of directors discussed the merits of engaging in such discussions with Builders FirstSource and, following such discussion, directed Moelis to prepare analyses for the BMC board of directors to review and discuss at its upcoming meeting on February 13, 2020, in order to facilitate a more comprehensive assessment of a potential business combination transaction with Builders FirstSource, including how such a transaction would compare to BMC continuing on a stand-alone basis and to a potential transaction with Party X.

On February 11, 2020, Mr. Levy, on behalf of Builders FirstSource, sent Mr. Bullock a letter following up on the discussions held on February 4, 2020, and presenting a non-binding proposal for a combination of BMC and Builders FirstSource with an implied value for BMC in the range of $36.00 to $38.00 per share of BMC common stock. The letter indicated that the consideration to be paid to BMC stockholders would consist of approximately 60% in cash and 40% in shares of BFS common stock and that, if BMC had a preference for an alternative consideration mix for BMC stockholders, Builders FirstSource would remain flexible to consider such preferences. In the letter, Mr. Levy also indicated that, if the transaction were consummated, Builders FirstSource would anticipate expanding the BFS board of directors to include meaningful representation from BMC. Mr. Levy further explained that Builders FirstSource, with the assistance of its financial and legal advisors, was prepared to begin working with BMC and its advisors to commence a due diligence review and negotiate transaction documents.

 

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On February 13, 2020, the BMC board of directors held a regularly scheduled meeting in Austin, Texas, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance in person or by telephone. At the meeting, Mr. Flitman, among other things, provided the BMC board of directors with an update regarding the ongoing discussions with Party X regarding a potential transaction and summarized the February 11 proposal from Builders FirstSource. The representatives of Moelis then reviewed with the BMC board of directors Builders FirstSource’s February 11 proposal and certain financial information regarding BMC’s stand-alone plan, a potential transaction with Party X and a potential transaction with Builders FirstSource and compared each of these alternatives. The BMC board of directors then discussed the merits of pursuing a transaction with Party X or Builders FirstSource and considered Builders FirstSource’s February 11 proposal, including the valuation of BMC implied by the proposal and how such implied valuation compared with BMC’s stand-alone plan and a potential transaction with Party X. Following discussion, the BMC board agreed to continue to concurrently pursue a potential transaction with Party X and a potential transaction with Builders FirstSource and instructed Mr. Bullock to discuss the February 11 proposal with Mr. Levy and representatives of Moelis to discuss the February 11 proposal with representatives of Rothschild & Co.

On February 14, 2020, the BMC transaction committee held a telephonic meeting, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance. Mr. Bullock provided an overview of the discussions of the BMC board of directors the day before regarding the possibility of exploring a potential transaction with Builders FirstSource. The Moelis representatives then reported to the committee on their conversations with Rothschild & Co following the BMC board of directors meeting the day prior, including that the representatives of Rothschild & Co had indicated that Builders FirstSource would not be able to refine its offer until it was able to validate the synergies that could potentially be achieved in a transaction with BMC. The BMC transaction committee discussed Builders FirstSource’s position and possible next steps. Following such discussion, in order to induce Builders FirstSource to improve its offer, the BMC transaction committee directed Moelis to seek to schedule a meeting of BMC’s chief executive officer and chief financial officer, with representatives of Moelis, and their Builders FirstSource counterparts, with representatives of Rothschild & Co and Morgan Stanley, to discuss, based solely on publicly available information, the potential synergies that could be achieved in a business combination of BMC and Builders FirstSource.

Also on February 14, 2020, the BFS board of directors held a telephonic meeting, with members of Builders FirstSource management in attendance, to discuss, among other things, the potential transaction with BMC. Messrs. Levy and Crow updated the BFS board of directors on their conversations with Messrs. Bullock and Flitman. A discussion ensued regarding the potential merits of a business combination between Builders FirstSource and BMC, and the BFS board of directors indicated its support for Mr. Levy and members of Builders FirstSource’s senior management and representatives to continue to have further discussions with BMC and its representatives.

On February 15, 2020, Messrs. Flitman and Crow, together with Mr. Peter Jackson, the chief financial officer of Builders FirstSource, and Mr. Jim Major, the chief financial officer of BMC, and representatives of Rothschild & Co, Morgan Stanley and Moelis, met telephonically to discuss, among other matters, the estimated cost-savings and other synergies that could potentially be achieved by the combined company as a result of a business combination of Builders FirstSource and BMC.

On February 16, 2020, the BFS board of directors held a telephonic meeting, with members of Builders FirstSource’s senior management in attendance, to receive a report on the status of discussions between Builders FirstSource’s management and representatives and BMC’s management and representatives regarding a potential combination of their respective businesses. The BFS board of directors also received a report from Builders FirstSource’s senior management regarding management’s analysis and views of the benefits of and potential synergies to be recognized from a transaction with BMC. After further discussion, the BFS board of directors expressed its support for management to continue discussions with BMC and to increase the amount of proposed consideration offered by Builders FirstSource for each share of BMC common stock. The BFS board of directors then authorized the submission by Builders FirstSource of a revised non-binding proposal to BMC for a potential

 

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business combination between Builders FirstSource and BMC with an implied value for BMC in the range of $38.00 to $38.50 per share of BMC common stock. The BFS board of directors also authorized Mr. Levy to increase such proposal to a price of up to $40.00 per share of BMC common stock in the event that BMC was unwilling to agree to a transaction at a lower price.

On February 16, 2020, Mr. Levy, on behalf of Builders FirstSource, sent Mr. Bullock an updated, non-binding proposal for a potential business combination between Builders FirstSource and BMC whereby BMC’s stockholders would receive merger consideration in the range of $38.00 to $38.50 per share of BMC common stock, consisting of approximately 55% in cash and 45% in shares of BFS common stock. In the letter, Builders FirstSource indicated that it would like to commence due diligence promptly and proposed that the parties enter into a mutual confidentiality agreement to permit the exchange of confidential information for purposes of the parties’ due diligence investigation. Builders FirstSource also stated in the letter that, in light of the significant resources that Builders FirstSource would devote to pursuing a potential transaction, the parties should enter into a customary exclusivity agreement for a limited period of time to complete due diligence and the work necessary to prepare and execute definitive agreements.

In the morning of February 17, 2020, the BMC transaction committee held a telephonic meeting with members of BMC management and representatives of Simpson Thacher and Moelis in attendance, to discuss Builders FirstSource’s February 16 proposal. Mr. Bullock reported that he had shared Builders FirstSource’s proposal with the BMC directors. The representatives of Moelis reviewed with the BMC transaction committee the February 16 proposal and discussed certain financial information regarding the February 16 proposal, including, among other things, the changes of the financial terms as compared to the February 11 proposal. Mr. Flitman then provided a summary of the February 15 telephonic meeting between him, Messrs. Major, Crow and Jackson and the representatives of Moelis, Rothschild & Co and Morgan Stanley and noted that, at the meeting, the representatives of BMC and Builders FirstSource came to the preliminary conclusion that a potential transaction between BMC and Builders FirstSource could potentially generate significant cost-savings and other synergies. The committee discussed the matters presented at the meeting and possible next steps and determined to consider these matters with the BMC board of directors later that day.

In the afternoon of February 17, 2020, the BMC board of directors held a telephonic meeting, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance, to discuss Builders FirstSource’s February 16 proposal. Representatives of Moelis reviewed Builders FirstSource’s February 16 proposal, including by comparing its terms to Builders FirstSource’s previous non-binding proposals of July 6, 2018, and February 11, 2020, and discussed certain financial information regarding BMC’s stand-alone plan, a potential transaction with Builders FirstSource and a potential transaction with Party X and compared each of the alternatives. The Moelis representatives also discussed, among other matters, the financial impact that varying degrees of success in achieving the estimated synergies would have on the combined company resulting from a potential transaction with Builders FirstSource. The BMC board of directors discussed the February 16 proposal and the financial information presented by Moelis. During that discussion, Mr. Flitman expressed the view that, at this time and based on the information BMC management had been able to review, it was reasonable to assume that a potential transaction with Builders FirstSource could potentially generate significant cost-savings and other synergies. Mr. Flitman also noted that, in the view of BMC management, at this time it appeared that achieving the synergies preliminarily projected for a potential transaction with Builders FirstSource carried less risk than achieving the perceived synergies in a transaction with Party X. The BMC board of directors then discussed possible next steps, including with respect to a potential response to Builders FirstSource’s February 16 proposal and BMC’s ongoing discussions with Party X. Following such discussion, the BMC board of directors directed Mr. Bullock to telephone Mr. Levy to encourage Builders FirstSource to submit its “best and final offer” for BMC and to explain that the BMC board of directors anticipated that such offer would have an implied value of at least $40.00 per share of BMC common stock.

Following the BMC board of directors’ meeting that afternoon, Mr. Bullock telephoned Mr. Levy to convey BMC’s response to Builders FirstSource’s February 16 proposal. During their discussion, Mr. Bullock requested

 

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that Builders FirstSource increase its proposal so that it would have an implied value of at least $40.00 per share of BMC common stock, with the merger consideration consisting of approximately 60% in cash and 40% in shares of BFS common stock.

Following his discussion with Mr. Bullock, Mr. Levy then conferred with members of the BFS board of directors and senior management of Builders FirstSource, as well as representatives of Rothschild & Co, Morgan Stanley and Builders FirstSource’s legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP, which is referred to as Skadden, to discuss Mr. Bullock’s request for an increase in price. Following such discussions, Mr. Levy telephoned Mr. Bullock to inform Mr. Bullock that Builders FirstSource was willing to increase its non-binding proposal to $40.00 per share of BMC common stock but that such proposal was Builders FirstSource’s “best and final offer” and that the merger consideration would consist of approximately 60% in cash and 40% in shares of BFS common stock.

In the evening of February 17, 2020, the BMC board of directors reconvened telephonically with members of BMC management and representatives of Simpson Thacher and Moelis in attendance. Mr. Bullock reported on his discussion with Mr. Levy earlier that day and, among other things, informed the BMC board of directors of Builders FirstSource’s revised proposal that Mr. Levy had orally conveyed to him during their discussion. The representatives of Moelis then reviewed with the BMC board of directors Builders FirstSource’s February 17 proposal and discussed preliminary analyses and certain other financial information regarding a potential transaction with Builders FirstSource. The Simpson Thacher representatives discussed with the BMC board of directors certain legal matters, including the directors’ fiduciary duties as they applied in the context of considering Builders FirstSource’s February 17 proposal, the principal terms of a potential merger agreement that would have to be negotiated with Builders FirstSource and certain legal considerations regarding the requested exclusivity agreement. After the Moelis representatives had left the meeting, the members of the BMC transaction committee indicated that they were in favor of engaging in discussions with Builders FirstSource to see if a potential transaction was feasible. Following discussion, the BMC board of directors determined to explore a potential transaction with Builders FirstSource and that, in light of the anticipated scope, nature and timing of the due diligence review to be undertaken by Builders FirstSource and BMC, it would be reasonable for BMC to agree to Builders FirstSource’s request for a confidentiality agreement and an exclusivity period up to four weeks. The BMC board of directors also discussed possible next steps and determined, among other things, to request that Builders FirstSource memorialize its February 17 proposal in writing for BMC and authorized and directed BMC’s management to negotiate and execute on behalf of BMC an exclusivity agreement with Builders FirstSource and a separate mutual confidentiality agreement containing a customary mutual standstill provision.

In the morning of February 18, 2020, Mr. Levy, on behalf of Builders FirstSource, sent Mr. Bullock a letter setting forth the updated non-binding proposal that Mr. Levy had orally conveyed to Mr. Bullock the day before. The letter also indicated that, upon consummation of a potential transaction, Builders FirstSource anticipated that at least two of BMC’s directors would join the board of directors of the combined company.

Later on February 18, 2020, representatives of Skadden sent drafts of a confidentiality agreement and a separate exclusivity agreement to representatives of Simpson Thacher.

On February 19, 2020, Builders FirstSource sent BMC a list of initial due diligence information requests.

On February 20, 2020, Builders FirstSource and BMC entered into separate confidentiality and exclusivity agreements. The mutual confidentiality agreement contained a reciprocal non-solicitation provision prohibiting each party, for a period of twelve months, from soliciting for employment and hiring certain of the other party’s employees and a reciprocal standstill provision restricting each party, for a period of nine months, from, among other things, certain acquisitions of the other party’s securities and related actions. Under the exclusivity agreement, each party agreed to refrain from exploring competing transactions until the earlier of March 18, 2020, and the date on which Builders FirstSource notified BMC it no longer wished to pursue a potential transaction.

 

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Also on February 20, 2020, at the direction of the BMC board of directors, representatives of Moelis contacted Party X’s financial advisor to inform Party X that BMC no longer wished to pursue a potential transaction with Party X at that time and that BMC would end all discussions relating to such transaction.

On February 21, 2020, BMC and Moelis finalized and entered into an engagement letter with respect to Moelis’ engagement as financial advisor to the BMC board of directors in connection with a potential transaction with Builders FirstSource.

On February 22, 2020, BMC began to make available to Builders FirstSource in an electronic data room certain commercial, financial and legal information to facilitate Builders FirstSource’s due diligence review of BMC.

On February 23, 2020, BMC sent Builders FirstSource a list of initial due diligence information requests.

On February 24, 2020, representatives of Builders FirstSource and BMC management, together with representatives of each company’s financial advisors and consultants, met in Raleigh, North Carolina to discuss, among other things, various due diligence matters relating to each company and the estimated cost-savings and other synergies that could potentially be achieved in a combination of both companies.

On February 28, 2020, the BMC transaction committee held a telephonic meeting, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance, to discuss the status of BMC’s ongoing discussions with Builders FirstSource to explore the possibility of a business combination transaction. At the meeting, Mr. Flitman reported on, among other things, the February 24 due diligence meeting between representatives of Builders FirstSource and BMC. A representative of BMC management then informed the committee that, on February 20, BMC and Builders FirstSource entered into a confidentiality agreement and exclusivity agreement and reported, among other matters, on the status of the ongoing due diligence investigation by BMC and Builders FirstSource. The representatives of Moelis then provided an update regarding the recent capital markets volatility in response to uncertainty created by the growing COVID-19 pandemic, discussing, among other things, global macroeconomic data and the possible impact of the pandemic on a potential transaction between Builders FirstSource and BMC.

Also on February 28, 2020, Mr. Flitman updated the BMC board of directors via email on various topics related to a potential transaction with Builders FirstSource, including, as was discussed with the BMC transaction committee earlier that day, that the BFS board of directors had invited him to attend a board meeting on March 3, 2020.

On March 1, 2020, Builders FirstSource began to make available to BMC in an electronic data room certain commercial, financial and legal information to facilitate BMC’s due diligence review of Builders FirstSource.

On March 3, 2020, the BFS board of directors held a regularly scheduled meeting in New York, New York, with members of Builders FirstSource management in attendance. Among other things, the BFS board of directors received a report on the status of discussions between the management teams and advisors of each of Builders FirstSource and BMC and the preliminary financial information relating to the proposed transaction that had been reviewed with Builders FirstSource’s management by Rothschild & Co. Members of the management of Builders FirstSource also reported on the due diligence reviews then being conducted by the two companies and the preliminary financial evaluations of the benefits and estimated synergies of a potential business combination of Builders FirstSource and BMC. After this discussion, Mr. Flitman and Mr. Bullock were invited to join the meeting, during which Mr. Flitman discussed, among other topics, his background and experience, as well as certain aspects of BMC’s business. Later on March 3, 2020, Mr. Bullock reported to the BMC board of directors via email on the meeting.

Also on March 3, 2020, representatives of Skadden sent representatives of Simpson Thacher a draft of the proposed merger agreement.

 

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On March 5, 2020, Moelis provided a relationship disclosure letter dated March 2, 2020, to the BMC board of directors, to update its relationship disclosure letter dated July 30, 2018.

Also on March 5, 2020, the BMC transaction committee held a telephonic meeting, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance. The representatives of Moelis provided the committee with an update on the capital markets volatility in response to uncertainty created by the COVID-19 pandemic. The Moelis representatives noted, among other things, that prevailing market conditions made it challenging for BMC and Builders FirstSource to be able to successfully execute a potential strategic transaction at this time, in part because of the severe dislocation in the capital markets. The committee then discussed possible next steps, including whether it was advisable to continue to conduct due diligence and whether the parties should complete their respective preliminary synergies analyses. Following discussion, the BMC transaction committee was of the view that, in light of challenges presented by prevailing market conditions, BMC and Builders FirstSource should cease discussions regarding a potential transaction at this time.

On March 6, 2020, Messrs. Levy and Bullock discussed by telephone the uncertainty and volatility in the capital markets resulting from the COVID-19 pandemic and the effect of such uncertainty on the proposed transaction.

Later on the afternoon of March 6, 2020, the BMC board of directors held a telephonic meeting, with members of BMC management and representatives of Simpson Thacher and Moelis in attendance. The representatives of Moelis provided the BMC board of directors with an overview of the then-current state of the capital markets that was substantially similar to the report that Moelis had given the BMC transaction committee the day before, including that prevailing market conditions would make it difficult to complete a potential transaction on the terms proposed by Builders FirstSource in the February 17 proposal. The BMC board of directors then discussed possible next steps with respect to the possibility of a transaction with Builders FirstSource and determined to end discussions in light of challenges presented by prevailing market conditions.

On March 11, 2020, Mr. Levy contacted Mr. Bullock by telephone to discuss the current state of capital markets and the status of the proposed transaction. Mr. Levy emphasized, among other things, Builders FirstSource’s continuing interest in a potential business combination with BMC and explained that Builders FirstSource might be willing to develop a revised structure for the transaction under the right conditions. Also on March 11, 2020, BMC withdrew Builders FirstSource’s access to BMC’s electronic data room, and Builders FirstSource also closed its electronic data room.

On March 12, 2020, the BMC board of directors held a telephonic meeting, with members of BMC management in attendance, to discuss, among other matters, the performance of BMC’s business during the COVID-19 pandemic. At the meeting, Mr. Bullock updated the BMC board of directors regarding his conversation with Mr. Levy and confirmed to the BMC board of directors that, in light of the market downturn resulting from the COVID-19 pandemic and consistent with the March 6 determination of the BMC board of directors to end discussions regarding a transaction with Builders FirstSource, discussions between BMC and Builders FirstSource regarding a potential transaction had ended.

Between March 12, 2020, and late May 2020, Builders FirstSource and BMC did not engage in further discussions of the terms of any proposed business combination. Members of the management of Builders FirstSource and members of the management of BMC did interact during this period in the ordinary course of business, including with respect to the effects of the COVID-19 pandemic on the industry and market conditions.

On May 19, 2020, the BFS board of directors held a regularly scheduled telephonic meeting, with members of Builders FirstSource management in attendance, to discuss, among other things, a potential business combination between Builders FirstSource and BMC. After discussion, the BFS board of directors authorized Mr. Levy and Builders FirstSource’s executive officers to engage in discussions with BMC’s representatives regarding a potential business combination between Builders FirstSource and BMC.

 

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On May 27, 2020, Mr. Levy contacted Mr. Bullock by telephone to express an interest in negotiating the terms of a potential business combination between BMC and Builders FirstSource. Mr. Levy explained that, because, among other things, the businesses and share prices of Builders FirstSource and BMC had substantially comparable performance during the volatile market resulting from the COVID-19 pandemic, the parties should consider an all-stock merger transaction structure instead of the structures previously discussed. Mr. Levy also described his views of the potential synergies that would be created by combining the two businesses. Mr. Levy stated that the parties should consider an all-stock merger, with BMC stockholders receiving 1.280 shares of BFS common stock for each outstanding share of BMC common stock. Mr. Bullock informed Mr. Levy that he would discuss this matter with the BMC board of directors.

On May 29, 2020, the BMC board of directors held a telephonic meeting with members of BMC management in attendance, to discuss, among other things, the recent performance of BMC’s business. Mr. Bullock reported on his conversation with Mr. Levy on May 27, 2020. Following discussion, the BMC board of directors concluded that, in light of the then-current environment and the continuing uncertainty resulting from the COVID-19 pandemic, although the BMC board of directors remained open to exploring the possibility of a transaction in the future, BMC would continue to execute on its business strategy at that time and focus on navigating the challenges presented by the COVID-19 pandemic.

On June 4, 2020, Messrs. Levy and Bullock spoke by telephone. Mr. Bullock informed Mr. Levy that the BMC board of directors was not prepared to engage in discussions regarding the terms of a potential transaction in the current environment. Mr. Bullock indicated that the BMC board of directors believed BMC’s strategy yielded positive results and was confident that BMC would perform well in the then-current environment.

On the evening of June 6, 2020, Mr. Levy, on behalf of Builders FirstSource, sent a letter dated June 7 to Mr. Bullock following up on a discussion between Messrs. Levy and Bullock on May 27, 2020, and June 4, 2020, and reiterating Builders FirstSource’s non-binding proposal of an all-stock merger with BMC at a fixed exchange ratio of 1.280 shares of BFS common stock for each share of BMC common stock. The letter noted that, by structuring the proposed transaction as an all-stock combination with a fixed exchange ratio, the combined company would have a strong balance sheet and the financial flexibility and resources to accelerate the strategic growth and differentiation of the combined company. In the letter, Builders FirstSource also indicated that the combined company should be structured with balanced governance and board representation commensurate with pro forma ownership and that Builders FirstSource anticipated that Mr. Flitman would become the chief executive officer of the combined company in the near term. Mr. Bullock shared a copy of the June 7 proposal with the other BMC directors.

On June 10, 2020, the BMC transaction committee held a telephonic meeting with members of BMC management and representatives of Simpson Thacher in attendance, to discuss, among other matters, Builders FirstSource’s June 7 proposal. Mr. Bullock reviewed with the committee Builders FirstSource’s June 7 proposal. Mr. Bullock also reviewed with the committee the telephone call he received from representatives of Builders FirstSource shortly before Mr. Bullock received the letter, during which the representatives of Builders FirstSource noted that they thought it an appropriate time to engage in discussions regarding a business combination transaction. The BMC transaction committee discussed the June 7 proposal, including, among other matters, the fact that Builders FirstSource proposed that a transaction be structured as an all-stock merger and that, as stated in the letter, Mr. Flitman was expected to become the chief executive officer of the combined company. During the discussion, it was noted that the all-stock nature of the proposal would afford BMC’s stockholders an opportunity to meaningfully participate in any value creation arising from a potential transaction, although the immediate premium to BMC’s then-current market price may not be as substantial as was contemplated in the discussions regarding a potential cash-and-stock transaction earlier in the year. Following further discussion, the BMC transaction committee determined that it would be helpful for Moelis to provide an assessment of the June 7 proposal based on, among other things, Moelis’ qualifications, experience and reputation and its familiarity with BMC, Builders FirstSource and their respective businesses and the industry in which they operated, as well as the prior discussions regarding a potential transaction between Builders FirstSource and BMC.

 

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On June 12, 2020, the BMC board of directors held a regularly scheduled telephonic meeting with members of BMC management in attendance. At the meeting, among other things, Mr. Bullock reviewed with the BMC board of directors Builders FirstSource’s June 7 proposal. Mr. Bullock noted for the BMC board of directors that the BMC transaction committee had met to discuss the June 7 proposal and determined it would be helpful for Moelis to provide an assessment of the proposal for the committee. Following discussion, the BMC board of directors determined that the BMC transaction committee should update the BMC board of directors regarding Moelis’ assessment and advice with respect to the June 7 proposal.

On June 18, 2020, the BMC transaction committee held a telephonic meeting with members of BMC management and representatives of Simpson Thacher and Moelis in attendance. The representatives of Moelis discussed their preliminary financial analyses of a potential transaction between Builders FirstSource and BMC on the terms proposed in Builders FirstSource’s June 7 proposal. Among other matters, the Moelis representatives compared for the committee the financial and other key terms set forth in the June 7 proposal from Builders FirstSource and the February 17 proposal from Builders FirstSource and reviewed the premium that a potential transaction with Builders FirstSource would provide to BMC’s stockholders. Following discussion, the BMC transaction committee determined to recommend to the BMC board of directors that, among other matters, BMC update its projections and preliminary view on synergies and connect with Builders FirstSource management to understand Builders FirstSource’s views with respect to its forecast, which the committee believed was an important component to assessing the merits of exploring a potential transaction with Builders FirstSource. The Moelis representatives then left the meeting. The BMC transaction committee continued to discuss a potential transaction with Builders FirstSource, including the advantages and disadvantages presented by exploring such transaction at that time in light of the recent market uncertainty and the COVID-19 pandemic and the nature and scope of due diligence that had been performed earlier that year, as well as additional due diligence that would have to be performed to further evaluate the merits and risks associated with a potential transaction, such as with respect to potential synergies and other key value drivers. The members of BMC management left the meeting. The representatives of Simpson Thacher then advised the committee as to certain legal matters, including the directors’ fiduciary duties in connection with considering a potential transaction with Builders FirstSource, and the process to evaluate such a transaction. The committee and the representatives of Simpson Thacher also discussed the potential conflict of interest affecting Mr. Flitman in light of the stated possibility of Mr. Flitman’s becoming chief executive officer of the combined company and that substantive negotiations, if any, by Mr. Flitman with Builders FirstSource about compensation were to be conducted at such time as determined by the transaction committee of the BMC board of directors. In that regard, the Simpson Thacher representatives noted that Mr. Flitman was aware of the appearance of a conflict of interest and that he had refrained from discussing the terms of his potential employment in the combined company and would continue to do so until approved by the BMC transaction committee or the BMC board of directors.

On June 25, 2020, the BMC board of directors held a regularly scheduled telephonic meeting with members of BMC management and representatives of Simpson Thacher in attendance, to discuss, among other matters, Builders FirstSource’s June 7 proposal. The representatives of Simpson Thacher reviewed with the BMC board of directors various legal considerations for parties to an all-stock merger such as the transaction contemplated by the June 7 proposal, as compared to the cash-and-stock transaction previously discussed by BMC and Builders FirstSource, including, among other legal matters, governance and social issues, such as combined company management and board representation, the importance of BMC’s due diligence investigation of Builders FirstSource and the evaluation of potential synergies given that BMC’s stockholders would have significant ownership in the combined company upon completion of such a transaction. The representatives of Simpson Thacher also reviewed with the BMC board of directors the directors’ fiduciary duties as they applied in the context of considering the June 7 proposal and other legal considerations. Mr. Bullock then reported to the directors on the meeting of the BMC transaction committee on June 18, 2020. Mr. Bullock reviewed with the other directors potential next steps as recommended by the BMC transaction committee. Mr. Bullock also suggested that he respond to a recent telephone call from Mr. Levy and inform him that, before BMC could make any determination regarding the June 7 proposal, it would need to exchange updated projections with Builders FirstSource and further information regarding the potential synergies to be in a position to evaluate Builders

 

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FirstSource’s proposal appropriately. The BMC board of directors engaged in a discussion regarding, among other matters, the timing of the June 7 proposal in light of the ongoing COVID-19 pandemic and need for the BMC board of directors to continue to explore and evaluate all reasonably attainable value-enhancing alternatives available to BMC and its stockholders.

Also at the meeting, and as previewed with the directors in advance of the meeting, Mr. Bullock stepped down as chair of the BMC board of directors, and the BMC board of directors appointed Mr. O’Leary to replace Mr. Bullock as the new chair of the BMC board of directors, each effective as of June 30, 2020. Mr. Bullock remained on the BMC board of directors and the transaction committee.

On June 29, 2020, Messrs. Levy and Bullock spoke by telephone. Mr. Bullock indicated that BMC would not be in a position to respond to Builders FirstSource’s June 7 proposal until it had conducted further due diligence review of Builders FirstSource, including a review of updated financial projections, the recent performance of Builders FirstSource’s business and the impact of the COVID-19 pandemic on Builders FirstSource’s operations. Mr. Levy agreed to facilitate BMC’s due diligence investigation.

Between June 30, 2020, and August 5, 2020, each of BMC and Builders FirstSource and their respective advisors, including financial advisors, outside consultants, outside legal counsel and accounting firms conducted a due diligence review of the other party and evaluated the potential transaction, including the potential cost-savings, synergies and dis-synergies that could result from a potential transaction between Builders FirstSource and BMC and the effect of actions taken by Builders FirstSource in response to the COVID-19 pandemic on a potential transaction. During this period, the members of management of each of Builders FirstSource and BMC held telephonic discussions from time to time to discuss various other details of the proposed transaction. The BMC transaction committee held six separate meetings to review the status and progress of, and to supervise, BMC’s and Builders FirstSource’s due diligence review, including the discussions regarding the synergies that could potentially be achieved in a business combination of BMC and Builders FirstSource.

On July 6, 2020, after having been informed that Mr. O’Leary would be the new chair of the BMC board of directors, Mr. Levy called Mr. O’Leary to introduce himself and to congratulate Mr. O’Leary. They did not discuss substantive matters related to the potential transaction.

Also on July 6, 2020, Mr. Crow and other members of Builders FirstSource’s management team, with representatives of Rothschild & Co and Morgan Stanley, met telephonically with Mr. Flitman and other members of BMC’s management team, with representatives of Moelis, to discuss a number of financial and commercial due diligence topics, including each party’s revised financial outlook for 2020 and a review of estimated cost-savings and other synergies that could result from a transaction between the parties.

On July 7, 2020, the BMC board of directors held a telephonic meeting with members of BMC management and representatives of Simpson Thacher in attendance, to discuss, among other matters, the status and updates regarding the possibility of a potential transaction with Builders FirstSource. Mr. O’Leary updated the BMC board of directors on his telephone conversation with Mr. Levy. Mr. Flitman then reviewed with the BMC board of directors certain due diligence matters regarding Builders FirstSource, including the key points from the teleconference that members of management of BMC and Builders FirstSource had held the day before and Builders FirstSource’s current view of the potential synergies that could be achieved in a potential transaction. A representative of BMC management then reviewed BMC’s stand-alone projections, including, among other things, the impacts of the COVID-19 pandemic, cost initiatives taken by BMC in response to the COVID-19 pandemic and commodity costs on sales and margins. He then provided a review of BMC’s current projections and the macro assumptions underlying such forecast, including the most recent housing starts, lumber index forecasts and EBITDA margins. The BMC board of directors engaged in a discussion of the forecast, during which, among other things, the representative of BMC management highlighted the various updated assumptions underlying the current projections as compared to the stand-alone projections that had been discussed with the BMC board of directors in February 2020. The management representative noted that BMC was expected to

 

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exchange projections with Builders FirstSource in connection with their respective due diligence for purposes of exploring a potential transaction. Following such discussion, the BMC board of directors determined to share such projections with Moelis for use by Moelis for purposes of its financial analyses and make such projections available to Builders FirstSource and Rothschild & Co, as described in the section entitled “The Merger—Certain Unaudited Prospective Financial Information” beginning on page 124.

Also on July 7, 2020, Builders FirstSource re-opened its electronic data room to representatives and advisors of BMC, and BMC re-opened its electronic data room to representatives and advisors of Builders FirstSource.

On July 8, 2020, BMC sent Builders FirstSource a list of initial due diligence information requests.

On July 24, 2020, to facilitate the parties’ due diligence review and evaluation of a potential transaction, at the request of the BMC board of directors, Moelis provided Rothschild & Co with certain financial projections for BMC on a stand-alone basis. In addition, at the request of the BFS board of directors, Rothschild & Co provided Moelis with certain financial projections for Builders FirstSource on a stand-alone basis.

On July 28, 2020, members of the management of Builders FirstSource, together with representatives of Rothschild & Co and an outside consultant, met by telephone with members of BMC’s management and representatives of Moelis and an outside consultant to discuss estimated cost-savings and other synergies that would result from a transaction between the parties.

On July 29, 2020, the BMC board of directors held a regularly scheduled meeting with members of BMC management and representatives of Simpson Thacher and Moelis in attendance. Among other things, a representative of BMC management discussed with the BMC board of directors BMC’s potential mergers-and-acquisitions pipeline. The representatives of Moelis then reported that BMC had made significant progress on due diligence, that BMC had provided Builders FirstSource with BMC’s financial projections and that Builders FirstSource had provided BMC with Builders FirstSource’s financial projections the week before. The representatives of Moelis reported that, to its knowledge, no material issues had emerged in connection with BMC’s due diligence review of Builders FirstSource to date. The Moelis representatives also discussed with the BMC board of directors that Moelis’ preliminary financial analyses indicated that the proposed transaction with Builders FirstSource had the potential to create meaningful long-term value for BMC’s stockholders, particularly in light of the estimated synergies coupled with the proposed stock-for-stock transaction structure proposed by Builders FirstSource. A representative of BMC’s outside consultant then provided the BMC board of directors with an update on the ongoing synergy assessment analysis that the consultant had been conducting for BMC. The members of BMC management and the representatives of Moelis and BMC’s outside consultant then left the meeting. The representatives of Simpson Thacher advised the BMC board of directors on certain legal aspects of the process related to a potential transaction with Builders FirstSource. The BMC board of directors then discussed possible next steps, including a potential response to Builders FirstSource’s June 7 proposal, and determined that it would continue to consider a potential transaction with Builders FirstSource relative to other alternatives that may be available to BMC, including remaining a stand-alone business. During this discussion, among other things, the BMC board of directors considered certain factors that suggested that pursuing a potential transaction with Builders FirstSource at that time could be advantageous to BMC and its stockholders. The representatives of Simpson Thacher referred the BMC board of directors to the potential conflict of interest with Mr. Flitman in light of the stated possibility by Builders FirstSource of Mr. Flitman’s becoming the chief executive officer of the combined company. Simpson Thacher representatives noted, among other things, that Mr. Flitman was aware of the appearance of the conflict of interest and that he had refrained from discussing the terms of his potential employment in the combined company and would continue to do so until approved by the BMC transaction committee or the BMC board of directors. Following further discussion, the BMC board of directors expressed support for continuing to explore the possibility of a transaction with Builders FirstSource at that time. The BMC board of directors also concluded that it should continue to consider other alternatives that may be available to BMC, including remaining a stand-alone business. The BMC board of directors directed Mr. O’Leary to contact Mr. Levy by indicating that BMC remained interested in exploring a potential transaction

 

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and that, following and subject to the satisfactory completion of BMC’s preliminary analysis on potential synergies, Mr. O’Leary would have a substantive discussion with Mr. Levy regarding the key terms of a potential transaction. Following the meeting, Mr. O’Leary telephoned Mr. Levy and communicated the position of the BMC board of directors.

On August 5, 2020, the BMC board of directors held a telephonic meeting with members of BMC management and representatives of Simpson Thacher, Moelis and BMC’s outside consultant in attendance to discuss the possibility of a potential business combination transaction between Builders FirstSource and BMC. Mr. O’Leary informed the BMC board of directors that he was scheduled to update Mr. Levy the following day. The Moelis representatives then reported, among other things, that BMC’s preliminary financial due diligence was substantially complete and that no material issues had emerged in connection with BMC management’s due diligence review to date (which a representative of BMC management confirmed). The Moelis representatives and Mr. Flitman then discussed with the BMC board of directors BMC’s current mergers-and-acquisitions pipeline, including opportunities and risks associated with BMC continuing on a stand-alone basis seeking to execute on BMC’s mergers-and-acquisitions strategy in lieu of pursuing a potential transaction with Builders FirstSource at that time. The representatives of BMC’s outside consultant then updated the BMC board of directors on the synergy assessment analysis that the consultant had been conducting for BMC in connection with its consideration of a potential transaction with Builders FirstSource. The representative of Simpson Thacher then advised the BMC board of directors on certain legal matters related to a potential transaction with Builders FirstSource in the event that the BMC board of directors determined to continue to explore the possibility of such transaction, including certain legal considerations relating to regulatory matters in connection with a potential transaction and how such matters could potentially be addressed in the definitive merger agreement. The representatives of Moelis and BMC’s outside consultant then left the meeting. Mr. O’Leary discussed the recent financial results of both BMC and Builders FirstSource, noting, among other things, the impact of such financial results on the companies’ stock prices and the corresponding impact on the exchange ratio proposed by Builders FirstSource in its June 7 proposal. Following discussion, the BMC board of directors determined that BMC should continue to explore the possibility of a potential transaction with Builders FirstSource and discussed Mr. O’Leary’s planned meeting the following day with Mr. Levy.

Also on August 5, 2020, representatives of Rothschild & Co reviewed with Builders FirstSource’s management certain updated financial information regarding a potential transaction between Builders FirstSource and BMC.

On August 6, 2020, Mr. O’Leary met with Mr. Levy in Westhampton, New York. At the meeting, Messrs. Levy and O’Leary discussed, among other matters, the proposed exchange ratio for an all-stock merger transaction and the other matters set forth in Builders FirstSource’s June 7 proposal regarding the identity of the chief executive officer and board composition of the combined company in the event of a mutually agreed transaction. With regard to the proposed exchange ratio, Mr. Levy stated, among other things, that he and the other Builders FirstSource directors might consider the exchange ratio further but that, in Builders FirstSource’s view, its June 7 proposal already represented an attractive premium over BMC’s then-current stock price, particularly in an all-stock combination transaction.

In the morning of August 7, 2020, Mr. Levy contacted Mr. O’Leary by telephone to discuss Mr. O’Leary’s request for an increase in the exchange ratio of the proposed transaction. Mr. Levy explained that Builders FirstSource could potentially agree to a modest increase in the proposed fixed exchange ratio of 1.300 shares of BFS common stock per share of BMC common stock. Mr. Levy also stated that the combined company’s board of directors could consist of twelve members, five of whom would be current BMC directors. Mr. Levy also reiterated that Mr. Flitman was expected to assume the role of chief executive officer of the combined company after a transition period following completion of the proposed merger, during which Mr. Crow would continue in his position. Mr. Levy also conveyed that Builders FirstSource’s non-binding proposal assumed that the combined company would have its headquarters in Dallas, Texas, the location of Builders FirstSource’s current headquarters, and would retain Builders FirstSource’s name and trading symbol.

 

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Shortly after his conversation with Mr. Levy, Mr. O’Leary discussed Builders FirstSource’s revised proposal and potential next steps with members of the BMC transaction committee, Mr. Flitman and representatives of Moelis and Simpson Thacher. Following discussion, a consensus emerged to the effect that Mr. O’Leary should respond to Mr. Levy that, although Builders FirstSource’s proposals regarding the combined company’s board composition, location of the combined company’s headquarters and name of the combined company were acceptable to BMC, the BMC board of directors nonetheless expected an improvement to the exchange ratio to be paid in the proposed transaction to BMC’s stockholders.

Later that morning, Mr. O’Leary telephoned Mr. Levy to convey that BMC would be willing to agree to the board composition, headquarters and name and trading symbol of the combined company as Mr. Levy had proposed, but Mr. O’Leary explained that the exchange ratio should be increased to at least 1.350 shares of BFS common stock per share of BMC common stock.

In the afternoon of the same day, Mr. Levy telephoned Mr. O’Leary to discuss the proposed exchange ratio. During the call, Mr. Levy indicated that Builders FirstSource was potentially prepared to agree to an exchange ratio of 1.3125, as well as the other terms outlined by Mr. Levy by telephone earlier that morning, subject to approval by the BFS board of directors, satisfactory completion of due diligence and negotiation of definitive transaction documents.

Later that afternoon, the BMC board of directors held a telephonic meeting with members of BMC management and representatives of Simpson Thacher and Moelis in attendance, to discuss the possibility of a potential transaction with Builders FirstSource. At the meeting, Mr. O’Leary updated the board on his discussions with Mr. Levy earlier that day, including that Builders FirstSource was potentially prepared to agree to an exchange ratio of 1.3125. Mr. O’Leary noted that, in light of his discussions with Mr. Levy and BMC’s advisors, he was of the view that Builders FirstSource likely would not be willing to further increase the exchange ratio. The representatives of Moelis then discussed with the BMC board of directors certain financial analyses of Builders FirstSource’s proposal, including the pro forma ownership of the combined company by BMC’s stockholders implied by Builders FirstSource’s proposal, the premiums paid in selected all-stock publicly announced mergers-and-acquisitions transactions, a comparison of the proposed exchange ratio with exchange ratios implied by BMC’s and Builders FirstSource’s historical trading prices and an illustrative value creation analysis. The BMC board of directors discussed various aspects of a potential transaction with Builders FirstSource, including certain valuation-related matters, the exchange ratio and the proposed governance structure of the combined company. Following such discussion, the BMC board of directors determined that BMC should not seek a further increase in the exchange ratio because of, among other things, the shared belief that Builders FirstSource likely would not be willing to increase the exchange ratio beyond 1.3125 and the risk that seeking such increase could potentially cause Builders FirstSource to abandon the discussions to explore a transaction with BMC. Following further discussion, the BMC board of directors determined to move forward with pursuing a potential transaction with Builders FirstSource on the basis of Builders FirstSource’s last proposal and directed management, with the assistance of BMC’s advisors, to complete BMC’s due diligence of Builders FirstSource and negotiate definitive transaction documents in form and substance acceptable to BMC and subject to approval by the BMC board of directors. As instructed by the BMC board of directors, Mr. O’Leary contacted Mr. Levy by telephone to convey the foregoing matters.

On August 11, 2020, the BFS board of directors, with members of Builders FirstSource management and representatives of Rothschild & Co, Morgan Stanley and Skadden in attendance, met by remote communications to discuss, among other things, the potential business combination between Builders FirstSource and BMC. Mr. Crow provided an update on the status of the parties’ discussions, including a summary of their respective synergies analyses and of the due diligence review of BMC. Mr. Levy then described his meeting on August 6, 2020, with Mr. O’Leary, including their discussion of certain terms of the potential transaction. Following Mr. Levy’s report, representatives of Builders FirstSource’s financial advisors, Rothschild & Co and Morgan Stanley, reviewed certain financial information, data and performance metrics relating to the potential transaction, as well as the estimated net synergies that Builders FirstSource expected the combined company to

 

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achieve following closing of the transaction and the costs to be incurred to achieve such synergies. After discussion, the BFS board of directors authorized Mr. Levy and Builders FirstSource’s senior management to continue discussions with BMC regarding the potential transaction and to negotiate the terms of definitive transaction documents, subject to the approval of the BFS board of directors of any final or binding proposal and of any definitive agreements providing for such proposed transaction.

On August 12, 2020, members of the respective management teams of Builders FirstSource and BMC, together with representatives of both parties’ financial advisors and outside consultants, met in Atlanta, Georgia, with some participating remotely, to discuss certain due diligence items, including both companies’ respective synergies analyses (including the assumptions underlying their respective analyses), certain items relating to the companies’ information technology infrastructure and other matters related to their respective due diligence reviews. On that same day, Messrs. Crow and Flitman met separately to discuss matters related to the possible organizational structure of the combined company’s senior management.

On August 13, 2020, representatives of Skadden sent representatives of Simpson Thacher a draft merger agreement for the potential transaction. The draft merger agreement provided for an exchange ratio of 1.3125 shares of BFS common stock for each share of BMC common stock, a board of directors of the combined company consisting of twelve members, five of whom would be BMC directors immediately prior to completion of the merger, and seven of whom would be directors of Builders FirstSource immediately prior to completion of the merger, and the appointment of Mr. Flitman as chief executive officer of Builders FirstSource after a 90-day transition period following the closing during which period Mr. Crow would continue in such position. The draft merger agreement did not provide either company the right to terminate the merger agreement to accept a superior acquisition proposal prior to its meeting of stockholders to vote on the transaction and otherwise contained provisions that were customary for a transaction of this nature, including reciprocal restrictions regarding the solicitation of competing acquisition proposals, termination rights, the circumstances in which a termination fee would become payable, mutual representations, warranties and covenants and customary closing conditions.

Also on August 13, 2020, following consultations between Mr. O’Leary and members of the BMC transaction committee during which Mr. O’Leary noted that the due diligence review of the parties was in advanced status and the draft merger agreement was consistent with BMC’s expectations on material matters, Mr. O’Leary informed Builders FirstSource that Mr. Flitman could now have substantive discussions with Builders FirstSource regarding the terms of his employment by Builders FirstSource as its chief executive officer following closing, including compensation arrangements, subject to Mr. Flitman’s reporting on key proposals and communications to the BMC transaction committee or board of directors.

Between August 13, 2020, and August 26, 2020, representatives of Skadden and Simpson Thacher exchanged a number of drafts of the merger agreement and continued to negotiate various issues, including governance provisions for the combined company, termination provisions, the amount of the termination fee, the scope of each party’s interim operating covenants, restrictions on each party’s ability to solicit competing acquisition proposals and the scope of the parties’ respective obligations to obtain required regulatory approvals in connection with consummating the potential transaction.

On August 14, 2020, the BMC transaction committee held a telephonic meeting with members of BMC management and representatives of Simpson Thacher and Moelis in attendance. At the meeting, Mr. O’Leary updated the committee about the status of the discussions with Builders FirstSource regarding the proposed transaction and discussed timing and potential next steps in connection with such transaction. Mr. Flitman then reported to the BMC transaction committee on the August 12 meeting between members of the management of Builders FirstSource and BMC, together with representatives of both parties’ financial advisors and outside consultants. Mr. Flitman also reported that he had met separately with Mr. Crow to discuss the possible organizational structure of the combined company’s senior management. The representatives of Simpson Thacher then discussed with the BMC board of directors the then current draft merger agreement, including,

 

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among other things, the deal protection provisions (noting that the draft merger agreement contained a restriction regarding the solicitation of competing acquisition proposals and provisions requiring each party to proceed with its stockholder vote even if such party were to receive a competing acquisition proposal that its board of directors concluded was superior, from a financial point of view, to the potential transaction with the other party or if such party’s board of directors changed its recommendation in favor of the transaction), as well as the termination provisions and closing conditions. The representatives of Simpson Thacher next reviewed with the BMC transaction committee the parties’ regulatory analysis, including the potential timing associated with the regulatory review process. Mr. O’Leary and the representatives of Simpson Thacher then discussed potential next steps for the committee and the BMC board of directors in connection with the potential transaction. In that regard, the representatives of Simpson Thacher noted that, on August 13, 2020, Builders FirstSource had been informed that Mr. Flitman could communicate with Builders FirstSource regarding potential compensatory matters.

Also on August 14, 2020, Builders FirstSource entered into an engagement letter with Morgan Stanley to retain Morgan Stanley as a financial advisor to assist Builders FirstSource in connection with a potential business combination involving BMC.

On August 18, 2020, the BMC board of directors held a telephonic meeting with members of BMC management and representatives of Simpson Thacher and Moelis in attendance, to discuss the status and updates regarding the ongoing discussions with Builders FirstSource regarding the potential transaction. Mr. O’Leary updated the BMC board of directors about the status of the discussions with Builders FirstSource. Mr. Flitman and other representatives of BMC management then provided the BMC board of directors an update on BMC’s due diligence investigation to date, including a summary of the August 12 meeting between representatives of BMC, Builders FirstSource and their respective financial advisors and outside consultants. The representatives of Simpson Thacher then provided the BMC board of directors with a summary of the anticipated principal terms of the draft merger agreement for the potential transaction, which summary was substantially similar to the report that Simpson Thacher had given the BMC transaction committee on August 14, 2020. The representatives of Simpson Thacher informed the BMC board of directors that, following consultations with members of the BMC transaction committee, Mr. Flitman had been permitted to communicate with Builders FirstSource regarding the terms of his potential employment with the combined company following the closing of the potential transaction. The Simpson Thacher representatives also discussed with the BMC board of directors their views regarding certain regulatory matters related to the potential transaction, including their key assumptions and analyses, and reviewed with the BMC board of directors the process, scope and expected timing of the regulatory review to be undertaken by governmental authorities of the potential transaction. Management then reported to the BMC board of directors that BMC had retained consultants to assist BMC with certain communications and other public relations-related matters in connection with the potential announcement of a transaction with Builders FirstSource.

On August 19, 2020, Rothschild & Co provided Builders FirstSource with a letter disclosing information regarding its relationships with Builders FirstSource and BMC and related matters in connection with the proposed transaction between Builders FirstSource and BMC.

On August 20, 2020, Builders FirstSource provided BMC with updated financial projections for Builders FirstSource on a stand-alone basis, as described in the section entitled “The Merger—Certain Unaudited Prospective Financial Information” beginning on page 124. On August 23, 2020, representatives of Builders FirstSource, BMC and their respective financial advisors spoke by telephone to discuss the updated financial projections that Builders FirstSource had provided BMC, including the assumptions underlying such updated projections and the differences from the financial projections that Builders FirstSource had provided BMC on July 24, 2020.

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an employment agreement between Mr. Flitman and Builders FirstSource regarding Mr. Flitman’s position as chief executive officer of Builders FirstSource following a transition period after the completion of the merger.

On August 21, 2020, Builders FirstSource and Mr. Flitman signed a term sheet that contained the principal terms of Mr. Flitman’s prospective employment terms with Builders FirstSource following the closing of the potential transaction.

On August 22, 2020, representatives of Skadden sent Mr. Flitman’s counsel a draft of a proposed amendment and restatement of Mr. Flitman’s employment agreement, which would take effect immediately upon, but subject to, consummation of the proposed transaction between Builders FirstSource and BMC. Later that day, Mr. Flitman’s counsel circulated a revised version of proposed employment agreement and engaged in discussions with representatives of Skadden regarding its proposed terms.

On August 25, 2020, the BFS board of directors, with members of Builders FirstSource management and representatives of Rothschild & Co, Morgan Stanley and Skadden in attendance, met by remote communications to discuss, among other things, the status of negotiations with BMC and to review the transaction documents and certain preliminary financial analyses of Rothschild & Co. Mr. Levy began the meeting with a brief description of the background of the transaction and its rationale and expected benefits for Builders FirstSource. Members of Builders FirstSource’s senior management then provided the BFS board of directors with a brief overview of the status of the transaction negotiations, including the status of the material agreements for the transaction, as well as the general economic rationale for the transaction, including economies of scale, increased internal efficiency, enhanced liquidity and balance sheet strength, reduced leverage, and broader product mix. Members of Builders FirstSource’s senior management also discussed with the BFS board of directors the financial projections of the parties and the estimated net synergies and other cost-savings expected to be realized from the transaction and the estimated costs to achieve such synergies, as well as a description of the approximate timeframe in which such synergies could be expected to be realized and the process and steps necessary to complete the transaction, including a description of the proposed transition and integration plan for the combined company. A representative of Skadden provided the BFS board of directors with a review of certain legal considerations relating to the directors’ review of the proposed transaction, including a description of the fiduciary duties of directors. Representatives of Rothschild & Co next reviewed and discussed with the BFS board of directors Rothschild & Co’s preliminary financial analyses of each of Builders FirstSource and BMC on a stand-alone basis, as well as the proposed merger, including a description of the projected financial information provided by Builders FirstSource’s management and the assumptions made by Rothschild & Co in connection with its analyses. The BFS board of directors asked a number of questions of the representatives of Rothschild & Co regarding Rothschild & Co’s preliminary financial analyses, methodologies and assumptions. The BFS board of directors also discussed and asked questions regarding the underlying financial data upon which Rothschild & Co based its analyses. After further questions, a representative of Skadden then summarized and described for the BFS board of directors the material terms of the proposed definitive merger agreement and described for the BFS board of directors those remaining points in the merger agreement that the parties were continuing to negotiate. The representative of Skadden responded to a number of questions from Builders FirstSource’s directors regarding the treatment of certain matters under the proposed merger agreement, such as the treatment of BMC’s equity awards and employee benefits. The BFS board of directors also considered the various factors described in the section entitled “The Merger—Recommendation of the BFS Board of Directors; Builders FirstSource’s Reasons for the Merger” beginning on page 99. In addition, Mr. Christophe reviewed with the BFS board of directors the proposed terms of Mr. Flitman’s amended and restated employment agreement, to become effective upon closing of the merger. Mr. Christophe described the compensation package agreed upon with Mr. Flitman and compared it to packages for similarly situated executives. Mr. Christophe also described for the BFS board of directors the negotiation process with Mr. Flitman. The BFS board of directors also discussed the timetable for executing the transaction. Because certain matters in the merger agreement remained unresolved between the parties at the time of this meeting, the Board agreed to adjourn and re-convene the following afternoon.

On August 25, 2020, Moelis provided a relationship disclosure letter dated August 25, 2020, to the BMC board of directors, to update its relationship disclosure letter dated March 2, 2020.

 

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In the afternoon of August 26, 2020, the BMC board of directors held a telephonic meeting with members of BMC management and representatives of Simpson Thacher and Moelis in attendance, among other things, to consider the proposed transaction with Builders FirstSource. Mr. O’Leary provided the BMC board of directors with an update regarding the discussions and negotiations with Builders FirstSource since the last board meeting on August 18, 2020. A representative of BMC management reported to the BMC board of directors on the BMC’s due diligence review of Builders FirstSource with respect to commercial, financial, legal and other matters. Representatives of Simpson Thacher reviewed with the directors their fiduciary duties as they applied in the context of considering the proposed transaction and discussed with the BMC board of directors the principal terms of the proposed merger agreement and certain other legal matters. The representatives of Moelis then reviewed with the BMC board of directors the updated financial projections for Builders FirstSource that Builders FirstSource had provided on August 20, 2020, and compared such updated projections with the projections that Builders FirstSource had provided on July 24, 2020. The representatives of Moelis then reviewed with the BMC board of directors their financial analyses of the proposed exchange ratio. After discussion with the BMC board of directors, Moelis rendered to the BMC board of directors its oral opinion, which was subsequently confirmed by delivery of a written opinion dated as of such date, to the effect that, as of the date of such opinion and based upon and subject to the various assumptions made, procedures followed, matters considered, qualifications and limitations upon the review undertaken in preparing such opinion, the exchange ratio was fair, from a financial point of view, to the holders of BMC common stock. For a more detailed discussion of Moelis’ opinion and its financial analyses, please see in the section entitled “The Merger—Opinion of BMC’s Financial Advisor” beginning on page 117. Members of BMC management then left the meeting, and the representatives of Simpson Thacher reviewed with the BMC board of directors the principal terms of Mr. Flitman’s proposed employment agreement with Builders FirstSource for his employment with the combined company following the closing of the potential transaction. Following such review, members of BMC management rejoined the meeting. The BMC board of directors then discussed and considered various factors relating to the proposed transaction with Builders FirstSource, including those described in the section entitled “The Merger—Recommendation of the BMC Board of Directors; BMC’s Reasons for the Merger” beginning on page 104, as well as the resolutions to be adopted by the BMC board of directors in connection with the proposed transaction. Following such discussion, the BMC board of directors unanimously voted to approve the merger agreement and the merger and the other transactions contemplated thereby, recommended that the stockholders of BMC adopt the merger agreement and directed that the merger agreement be submitted to BMC for adoption and authorized BMC management to take actions designed to accomplish the transactions contemplated by the merger agreement.

Also on August 26, 2020, the BFS board of directors re-convened and held a meeting by remote communications, with members of Builders FirstSource management and representatives of Rothschild & Co, Morgan Stanley and Skadden in attendance, to consider and act upon, among other things, the proposed merger agreement with BMC, the issuance of shares of BFS common stock in the merger, subject to stockholder approval, as well as the proposed amended and restated employment agreement with Mr. Flitman and the BFS charter amendment. Mr. Levy presided over the meeting, and a member of Builders FirstSource’s senior management reviewed the status of all transaction agreements. Representatives of Rothschild & Co provided their financial analyses regarding the proposed merger and responded to certain questions from the directors. After discussion with the BFS board of directors, Rothschild & Co rendered its oral opinion, which was subsequently confirmed by delivery of a written opinion dated as of such date, to the effect that, as of the date of such opinion subject to the assumptions, qualifications, limitations and other matters considered in connection with the preparation of such opinion, the exchange ratio in the merger pursuant to the merger agreement was fair, from a financial point of view, to Builders FirstSource. For a more detailed discussion of Rothschild & Co’s opinion and its financial analyses, please see in the section entitled “The Merger—Opinion of Builders FirstSource’s Financial Advisor” beginning on page 108. Following further discussion, the BFS board of directors unanimously authorized, approved and declared advisable the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement. The BFS board of directors also unanimously authorized and approved the issuance of BFS common stock pursuant to the merger agreement and approved and adopted the BFS charter amendment, subject to approval by Builders FirstSource’s stockholders.

 

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The BFS board of directors also unanimously voted to approve the amended and restated employment agreement between Builders FirstSource and Mr. Flitman, to become effective immediately upon closing of the merger, and authorized certain executive officers of Builders FirstSource to execute and deliver the merger agreement with BMC and the amended and restated employment agreement with Mr. Flitman. In addition, the BFS board of directors directed that the BFS share issuance and BFS charter amendment be submitted to Builders FirstSource stockholders for approval and recommended that stockholders of Builders FirstSource approve and adopt the BFS share issuance and BFS charter amendment.

Following the meetings of the BFS board of directors and the BMC board of directors, Builders FirstSource, Merger Sub and BMC entered into the merger agreement, and Builders FirstSource entered into the amended and restated employment agreement with Mr. Flitman regarding his employment with Builders FirstSource upon the closing of the proposed transaction.

On August 27, 2020, before the commencement of stock exchange trading hours, Builders FirstSource and BMC issued a joint press release announcing their entry into the merger agreement.

Recommendation of the BFS Board of Directors; Builders FirstSource’s Reasons for the Merger

After a thorough review and analysis of the merger, at a special meeting held on August 26, 2020, the BFS board of directors unanimously:

 

   

authorized and approved and declared advisable the merger agreement and the completion of the merger, the BFS share issuance, and the other transactions contemplated by the merger agreement, subject to approval of the BFS share issuance by BFS stockholders at the BFS stockholders meeting;

 

   

approved and adopted the BFS charter amendment, subject to approval of the BFS share issuance and adoption of the BFS charter amendment by BFS stockholders at the BFS stockholder meeting; and

 

   

recommended that the BFS stockholders approve the BFS share issuance and adopt the BFS charter amendment.

ACCORDINGLY, THE BFS BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT BFS STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO APPROVE THE BFS SHARE ISSUANCE, “FOR” THE PROPOSAL TO ADOPT THE BFS CHARTER AMENDMENT, AND “FOR” THE BFS ADJOURNMENT PROPOSAL.

In reaching its decision to authorize, approve and declare advisable the merger agreement and the transactions contemplated thereby, including the BFS share issuance, to approve and adopt the BFS charter amendment, in each case, subject to approval thereof by BFS stockholders, and to recommend that BFS stockholders adopt the BFS charter amendment and approve the BFS share issuance, on the terms and subject to the conditions set forth in the merger agreement, the BFS board of directors, as described in the section entitled “The Merger—Background of the Merger” beginning on page 79, held a number of meetings, consulted with Builders FirstSource’s senior management and its outside legal advisor, Skadden, Arps, Slate, Meagher & Flom LLP, which is referred to as Skadden, and its outside financial advisor, Rothschild & Co, and considered a number of factors, including the following:

Strategic Considerations

 

   

the ability of the combined company to achieve scale with a well-balanced and complementary portfolio in high growth areas;

 

   

the ability to create the nation’s premier supplier of building materials and services, with approximately 26,000 employees nationwide and a presence in 40 states, including most of the nation’s fastest growing regions;

 

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the expectation that the combined company will have complementary capabilities and focus on value-added product and service capabilities to enable further penetration of key segments through the delivery of value-enhancing efficiencies to customers and superior solutions across a broader platform;

 

   

the capacity of the combined company’s increased geographic reach and diversity to provide a wider set of opportunities and deeper resources for organic and inorganic growth to meet the needs of more customers in the highly fragmented professional building materials industry nationwide;

 

   

the combined company’s ability to use its greater resources to invest in innovation and develop targeted solutions;

 

   

the cultural alignment between Builders FirstSource and BMC, including shared performance-based cultures focused on people, safety, collaboration, integrity, diversity, customer satisfaction, and corporate social responsibility; and

 

   

the current and prospective business environment in which Builders FirstSource and BMC operate, including national, regional and local economic conditions, the competitive and regulatory environment and the likely effect of these factors on Builders FirstSource and the combined company.

Financial Considerations

 

   

the historical and projected financial information regarding BMC’s business, financial performance and condition, competitive position and prospects as a stand-alone company;

 

   

the expectation that approximately $130 million to $150 million in annual cost savings will be realized within three years following completion of the merger;

 

   

the expectation that the merger will be accretive to adjusted earnings per share in the first full year after completion of the merger (excluding transaction costs and other one-time charges);

 

   

the expectation that the combined company will be well-capitalized, with a strong balance sheet, robust free cash flow and a flexible capital structure, and the ability to pursue a wide range of capital deployment strategies and deliver value to stockholders; and

 

   

the exchange ratio and that the exchange ratio is fixed, with no adjustment in the merger consideration to be received by BMC stockholders as a result of possible increases or decreases in the trading price of BFS common stock following the announcement of the merger.

Considerations relating to the Governance of the Combined Company

 

   

the board of directors of the combined company at the effective time will be comprised of 12 directors, consisting of directors of each of Builders FirstSource and BMC, including seven members of the BFS board of directors as of immediately prior to the effective time;

 

   

Paul Levy will continue to serve as chairman of the BFS board of directors following the effective time;

 

   

Mr. Crow will continue to serve as Builders FirstSource’s chief executive officer through the effective time of the merger and for a transition period of 90 days following the effective time, following which BMC’s president and chief executive officer, Mr. Flitman, will succeed Mr. Crow as chief executive officer of the combined company;

 

   

other key members of the management teams of each of Builders FirstSource and BMC prior to the effective time of the merger will hold leadership positions in the combined company and key roles in leading the transition and integration of the combined company;

 

   

the combined company’s name will remain Builders FirstSource, Inc. and its stock will continue to trade on Nasdaq under the symbol “BLDR”; and

 

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the headquarters of the combined company will be in Dallas, Texas, with key functional corporate centers of excellence in both Raleigh, North Carolina and Denver, Colorado.

Considerations relating to the Merger Agreement

 

   

the nature of the conditions to the completion of the merger included in the merger agreement, including the reciprocal exceptions to the events that would constitute a material adverse effect on either Builders FirstSource or BMC for purposes of the merger agreement, as well as the likelihood of satisfaction of all conditions to the completion of the transactions;

 

   

the representations and warranties of Builders FirstSource and BMC, as well as that the interim operating covenants requiring the parties to conduct their respective businesses prior to completion of the merger in all material respects in the ordinary course, consistent with past practice, subject to specific limitations, are generally reciprocal;

 

   

the requirement that each party use its reasonable best efforts to obtain consents, approvals or authorizations of third parties and governmental authorities, including under the HSR Act, and that neither Builders FirstSource nor or BMC will be required to divest or otherwise dispose of any portion of its or their respective businesses, assets or contracts or take any other action if such action (individually or in the aggregate) would reasonably be expected to have an adverse effect that is material to Builders FirstSource and its subsidiaries (including BMC and its subsidiaries), taken as a whole (after giving effect to the merger and the other transactions contemplated by the merger agreement);

 

   

the restrictions in the merger agreement on BMC’s ability to respond to and negotiate certain acquisition proposals from third parties, the requirement that BMC pay Builders FirstSource a $66 million termination fee if the merger agreement is terminated under certain circumstances and the inability of BMC to terminate the merger agreement in connection with a change of recommendation by the BMC board of directors;

 

   

Builders FirstSource’s right to provide information to, and engage in discussions or negotiations with, a third party that makes a written acquisition proposal, if the BFS board of directors has determined in good faith, after consultation with its outside legal counsel and a nationally recognized financial advisor, that such acquisition proposal is, or could reasonably be expected to lead to, a superior acquisition proposal to acquire Builders FirstSource; and

 

   

the right of the BFS board of directors to change its recommendation to BFS stockholders to vote “FOR” the BFS share issuance proposal and the BFS charter amendment proposal if a superior acquisition proposal is available or an intervening event has occurred, so long as the BFS board of directors has determined in good faith, after consultation with its outside legal counsel and a nationally recognized financial advisor, that the failure to take such action would be inconsistent with its directors’ fiduciary duties, subject to certain conditions.

Other Considerations

 

   

BFS stockholders immediately prior to the merger will continue to own approximately 57% of the outstanding BFS common stock immediately following the merger, on a fully diluted basis;

 

   

the view of Builders FirstSource’s management concerning the likelihood that the merger would receive required approvals of applicable governmental authorities, without the imposition of conditions sufficiently material to preclude the merger, and would otherwise be completed in accordance with the terms of the merger agreement;

 

   

the recommendation of Builders FirstSource’s senior management in favor of the merger;

 

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the financial analyses reviewed and discussed with the BFS board of directors by representatives of Rothschild & Co as well as the oral opinion of Rothschild & Co rendered to the BFS board of directors on August 26, 2020 (which was subsequently confirmed in writing by delivery of Rothschild & Co’s written opinion dated the same date) to the effect that, as of such date and based upon and subject to the assumptions, qualifications, limitations and other matters set forth in its written opinion, the exchange ratio in the merger pursuant to the merger agreement was fair, from a financial point of view, to Builders FirstSource, as described in the section entitled “The Merger—Opinion of Builders FirstSource’s Financial Advisor” beginning on page 108 and the full text of the written opinion of Rothschild & Co, which is attached as Annex C to this joint proxy statement/prospectus;

 

   

the merger is expected to be a tax-free reorganization for U.S. federal income tax purposes and the obligations of each of BMC and Builders FirstSource to close include the delivery of a legal opinion to that effect;

 

   

the results of the due diligence review of BMC and its business, including with respect to legal, accounting, tax and human resources matters, conducted by Builders FirstSource and its advisors;

 

   

the alternatives reasonably available to Builders FirstSource, including a merger of equals with a comparable company, an acquisition of a smaller company or continuation on a stand-alone basis;

 

   

the ability of the BFS stockholders to approve or reject the merger by voting on the BFS share issuance and the BFS charter amendment; and

 

   

the impact of the merger on the customers and employees of Builders FirstSource.

The BFS board of directors weighed the advantages and opportunities described above against a number of potentially negative factors in its deliberations concerning the merger agreement and the merger, including:

 

   

the merger might not receive all necessary regulatory approvals, or a governmental authority could require divestitures or impose other restrictions as conditions to its approval; see the section entitled “The Merger—Regulatory Approvals” beginning on page 130;

 

   

the merger may not be completed despite the parties’ efforts, including that certain conditions to the completion of the merger are not within the control of the parties to the merger agreement and may not be satisfied or that completion of the merger may be unduly delayed, which could adversely affect Builders FirstSource, its business and the trading price of BFS common stock;

 

   

because the exchange ratio under the merger agreement would not be adjusted for changes in the market price of BFS common stock or BMC common stock, the value of the shares of BFS common stock to be issued in the merger to holders of shares of BMC common stock could be significantly more than the value of such shares immediately prior to the announcement of the proposed merger;

 

   

all the anticipated cost savings and other synergies, and/or enhanced revenue opportunities and other benefits expected as a result of the merger, may not be realized;

 

   

BMC’s financial performance may not meet Builders FirstSource’s expectations;

 

   

general economic and market conditions outside the control of the parties to the merger agreement could deteriorate;

 

   

the difficulties and management challenges inherent in completing the merger and integrating the businesses, operations and workforce of BMC with those of Builders FirstSource and the possibility of encountering difficulties in achieving expected growth and cost savings;

 

   

the possible diversion of management attention for an extended period of time during the pendency of the merger and, following completion, the integration of the two companies;

 

   

the provisions of the merger agreement that prohibit Builders FirstSource from soliciting other acquisition proposals and the potential payment to BMC by Builders FirstSource of a termination fee of

 

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$100 million, as described in the section entitled “The Merger Agreement—Termination Fees” beginning on page 156;

 

   

the termination fee of $66 million to which Builders FirstSource may be entitled, subject to the terms and upon the conditions of the merger agreement, in the event the merger agreement is terminated in certain circumstances may not be sufficient to compensate Builders FirstSource for the harm it might suffer as a result of such termination;

 

   

the potential for litigation relating to the proposed merger and the associated costs and inconvenience involved in defending such proceedings;

 

   

the potential difficulties in retaining key personnel of Builders FirstSource and BMC following announcement of the merger;

 

   

BFS stockholders or BMC stockholders may fail to approve the respective proposals presented at the BFS stockholder meeting or the BMC stockholder meeting;

 

   

certain provisions of the merger agreement, although reciprocal, may have the effect of discouraging alternative proposals involving Builders FirstSource;

 

   

the substantial costs to be incurred in connection with the merger, including those incurred regardless of whether the merger is completed; and

 

   

the terms of the merger agreement that restrict the ability of Builders FirstSource to operate its business outside of the ordinary course, consistent with past practice, until the effective time.

The BFS board of directors also considered (i) its fiduciary duties in light of the foregoing, (ii) that it received the views of Builders FirstSource’s senior management, and the advice of Builders FirstSource’s legal and financial advisors, regarding the merger, and (iii) the risks of the type and nature described in the section entitled “Risk Factors” beginning on page 43 and the matters described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 40.

The BFS board of directors considered all of the foregoing factors as a whole and, on balance, concluded that they supported a favorable determination to enter into the merger agreement.

In addition, the BFS board of directors was aware of and considered the interests of BFS directors and BFS executive officers that are different from, or in addition to, the interests of BFS stockholders generally, including the treatment of BFS stock options and other equity awards held by such directors and executive officers in the merger described in the section entitled “Interests of Builders FirstSource’s Directors and Executive Officers in the Merger” beginning on page 176 and Builders FirstSource’s agreement to indemnify Builders FirstSource’s directors and officers against certain claims and liabilities.

The foregoing discussion of the information and factors that the BFS board of directors considered is not intended to be exhaustive, but rather is meant to include certain material factors that the BFS board of directors considered. The BFS board of directors collectively reached the conclusion to approve the BFS share issuance, the BFS charter amendment, the merger and the other transactions contemplated by the merger agreement in light of the various factors described above and other factors that the members of the BFS board of directors believed were appropriate. In view of the complexity and wide variety of factors, both positive and negative, that the BFS board of directors considered in connection with its evaluation of the merger, the BFS board of directors did not find it practical, and did not attempt, to quantify, rank or otherwise assign relative or specific weights or values to any of the factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the BFS board of directors. In considering the factors discussed above, individual directors may have given different weights to different factors.

 

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The foregoing description of Builders FirstSource’s consideration of the factors supporting the merger is forward-looking in nature. This information should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 40.

Recommendation of the BMC Board of Directors; BMC’s Reasons for the Merger

After careful consideration, at a special meeting held on August 26, 2020, the BMC board of directors unanimously:

 

   

approved and declared advisable the merger agreement and the consummation of the merger and the other transactions contemplated thereby and determined that the terms of the merger agreement, the merger and the other transactions contemplated thereby are fair to, and in the best interests of, BMC and its stockholders; and

 

   

recommended to the stockholders of BMC that they adopt the merger agreement.

THE BMC BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT BMC STOCKHOLDERS VOTE “FOR” THE BMC MERGER AGREEMENT PROPOSAL.

In reaching its decision to approve and declare advisable the merger agreement and the completion of the merger and the other transactions contemplated thereby, the BMC board of directors, as described in the section entitled “The Merger—Background of the Merger” beginning on page 79, held a number of meetings, consulted with the BMC transaction committee, BMC’s management and representatives of BMC’s legal counsel and financial advisor, Simpson Thacher and Moelis, respectively, and considered the business, assets and liabilities, results of operations, financial performance, strategic direction and prospects of Builders FirstSource and BMC and other factors and determined that the terms of the merger agreement, the merger and the other transactions contemplated thereby are fair to, and in the best interests of, BMC and its stockholders.

In making its determination, the BMC directors considered a number of factors, including, among others, the following (not necessarily in order of importance):

 

   

a review of the potential alternatives to the merger, including pursuing alternative strategic transactions reasonably available to BMC, the potential value to the BMC stockholders that might result from such alternatives, including the timing and likelihood of accomplishing and creating value in such alternatives, and the assessment of the BMC board of directors that none of these alternatives were reasonably likely to result in greater value for BMC stockholders than the merger;

 

   

the risks to BMC of continuing to operate and achieve growth on a stand-alone basis, including, among other factors, the risks associated with executing on and achieving growth through BMC’s existing acquisition strategy;

 

   

the fact that the merger will bring together corporate cultures that are both focused on people, safety, innovation, collaboration, integrity, diversity and corporate social responsibility;

 

   

the expectation that the combined company will have the resources to invest in innovation and develop targeted solutions, which is expected to accelerate the next generation of growth and deliver value on behalf of customers;

 

   

the BMC board of directors’ belief that the merger would create the nation’s premier supplier of building materials and services, operating a leading network of 550 distribution and manufacturing locations and establishing a presence in 40 states, including 44 of the top 50 metropolitan statistical areas, covering most of the nation’s fastest growing regions;

 

   

the expectation that the merger will generate approximately $130 million to $150 million in annual run-rate cost savings within three years;

 

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the prospect that BMC’s distinct millwork capability, READY-FRAME® offerings and other manufactured products would complement Builders FirstSource’s strengths in trusses and manufactured components, among other offerings, to enable further penetration of key segments through the delivery of value-enhancing efficiencies to customers and superior solutions across a broader platform;

 

   

the opportunity to increase the companies’ geographic reach and diversity and provide a wider set of opportunities and deeper resources for organic and inorganic growth to meet the needs of more customers in the highly fragmented professional building materials industry nationwide;

 

   

the scale and synergies expected to be achieved by the combined company, including through enhanced direct and indirect procurement capabilities, to provide greater value to customers;

 

   

the fact that the exchange ratio represented a premium of approximately 13.7% to the per share price of the BMC common stock as of the close of business on August 25, 2020;

 

   

the fact that Mr. Flitman will become the chief executive officer of Builders FirstSource after a 90-day transition period following the completion of the merger and serve on the BFS board of directors;

 

   

the fact that the merger agreement provides that the BFS board of directors will consist of 12 directors, five of whom will be designated by BMC from among members of the BMC board immediately prior to the merger;

 

   

that the exchange ratio of 1.3125 shares of BFS common stock for each share of BMC common stock is fixed;

 

   

that holders of shares of BMC common stock as of immediately prior to the completion of the merger will hold, in the aggregate, approximately 43% of the issued and outstanding shares of BFS common stock, on a fully diluted basis and based on the number of outstanding shares as of November 13, 2020;

 

   

the ability of the BMC stockholders to own equity in a combined company that is expected to have a strong financial profile and capital flexibility, with combined adjusted EBITDA of approximately $950 million for the trailing 12-month period ended June 30, 2020, including annual run-rate synergies, and combined net debt-to-adjusted EBITDA of 1.4x;

 

   

the historical and projected financial information concerning BMC’s business, financial performance and condition, results of operations, earnings, competitive position and prospects as a stand-alone company;

 

   

the information and discussions with BMC’s management and BMC’s outside advisors regarding Builders FirstSource’s business, assets, financial condition, results of operations, current business strategy and prospects, including the projected long-term financial results of Builders FirstSource as a stand-alone company, the size and scale of the combined company and the expected pro forma effect of the proposed merger on the combined company;

 

   

the current and prospective business environment in which BMC and Builders FirstSource operate, including national and local economic conditions, the competitive and regulatory environment and the likely effect of these factors on BMC and the combined company;

 

   

the fact that the merger and the all-stock consideration offered in connection therewith provide BMC stockholders with an opportunity to participate in the equity value of the combined company, including future growth and the expected cost synergies resulting from the merger;

 

   

the financial analyses reviewed and discussed with the BMC board of directors by representatives of Moelis, as well as the oral opinion of Moelis to the BMC board of directors, subsequently confirmed in writing, that, as of the date of such opinion and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth therein, the exchange ratio is fair, from a financial point of view, to the holders of BMC common stock, as described in the section entitled “The Merger—Opinion of BMCs Financial Advisor” beginning on page 117;

 

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the fact that the merger is intended to be tax-free for U.S. federal income tax purposes to BMC stockholders, as described in the section entitled “Material United States Federal Income Tax Consequences” beginning on page 186, and the expectation that the merger will constitute a “reorganization” within the meaning of Section 368(a) of the Code;

 

   

the likelihood that the merger would be completed, including after consideration of the risks related to certain conditions and regulatory approvals which will be required to complete the merger;

 

   

the ability of the BMC stockholders to approve or reject the merger by voting on the adoption of the merger agreement;

 

   

the review by the BMC transaction committee of the terms of the merger agreement and the merger and the other transactions contemplated thereby;

 

   

the impact of the merger on the customers and employees of BMC;

 

   

the fact that the terms and conditions of the merger agreement were the product of extensive negotiations between BMC and its advisors, on the one hand, and Builders FirstSource and its advisors, on the other hand; and

 

   

the review by the BMC board of directors with its advisors of the structure of the proposed merger and the financial and other terms of the merger agreement, including the parties’ representations, warranties and covenants, the conditions to their respective obligations and the termination provisions as well as the likelihood of completion of the proposed transactions and the evaluation of BMC board of directors of the likely time period necessary to complete the merger.

The BMC board of directors also considered the following specific aspects of the merger agreement:

 

   

the nature of the closing conditions included in the merger agreement, including the reciprocal exceptions to the events that would constitute a material adverse effect on either BMC or Builders FirstSource for purposes of the merger agreement, as well as the likelihood of satisfaction of all conditions to completion of the transactions;

 

   

that the representations and warranties of BMC and Builders FirstSource, as well as the interim operating covenants requiring the parties to conduct their respective businesses in the ordinary course prior to completion of the merger, subject to specific limitations, are generally reciprocal;

 

   

the requirement of BMC and Builders FirstSource to use reasonable best efforts to take or cause to be taken such actions reasonably necessary, proper or advisable to complete the merger, including to obtain required regulatory approvals, except if such action (individually or in the aggregate) would reasonably be expected to have an adverse effect that is material to Builders FirstSource and its subsidiaries (including BMC and its subsidiaries), taken as a whole (after giving effect to the merger and the other transactions contemplated by the merger agreement);

 

   

the restrictions in the merger agreement on Builders FirstSource’s ability to solicit, respond to and negotiate certain alternative transaction proposals from third parties;

 

   

the requirement that Builders FirstSource pay BMC a $100 million termination fee if the merger agreement is terminated under certain circumstances and the inability of Builders FirstSource to terminate the merger agreement in connection with a change of recommendation by the BFS board of directors;

 

   

BMC’s right to engage in discussions and negotiations with, and provide information to, a third party that makes an unsolicited written bona fide competing acquisition proposal after the date of the merger agreement if the BMC board of directors has determined in good faith, after consultation with its outside legal counsel and a nationally recognized financial advisor, that such competing acquisition proposal constitutes or could reasonably be expected to result in a transaction more favorable to the BMC stockholders from a financial point of view than the merger and the other transactions contemplated by the merger agreement; and

 

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the right of the BMC board of directors under certain circumstances to change its recommendation to BMC stockholders to vote “FOR” the BMC merger agreement proposal if a superior acquisition proposal is available or an intervening event has occurred so long as the BMC board of directors has determined in good faith, after consultation with its outside legal counsel and a nationally recognized financial advisor, that the failure to take such action would be inconsistent with the BMC board of directors’ fiduciary duties, subject to certain conditions (including taking into account any modifications to the terms of the merger agreement and, in connection with the termination of the merger agreement, BMC being obligated to pay Builders FirstSource a termination fee of $66 million if the merger agreement is terminated in certain circumstances as described in the section entitled “The Merger Agreement—Termination Fees” beginning on page 156).

The BMC board of directors also considered a number of potential negative factors, risks and uncertainties associated with the merger in connection with its deliberation of the merger, including, among others, the following (not necessarily in order of importance):

 

   

the fact that Builders FirstSource’s financial performance may not meet BMC’s expectations;

 

   

the difficulties and management challenges inherent in completing the merger and integrating the businesses, operations and workforce of Builders FirstSource with those of BMC and the risk of not capturing all of the anticipated cost savings and synergies and the risk that other anticipated benefits of the merger might not be realized;

 

   

the amount of time it could take to complete the merger, including that completion of the merger depends on factors outside of BMC’s or Builders FirstSource’s control, and the risk that the pendency of the merger for an extended period of time following the announcement of the execution of the merger agreement could have an adverse impact on BMC and Builders FirstSource, including their respective customer, supplier and other business relationships;

 

   

the potential risk of diverting management attention and resources from the operation of BMC’s business during the pendency of the merger;

 

   

the fact that the BFS board of directors may, under certain circumstances specified in the merger agreement, withhold, withdraw, qualify or change its recommendation to BFS stockholders to vote “FOR” the BFS share issuance proposal and “FOR” the BFS charter amendment proposal;

 

   

the provisions of the merger agreement which prohibit BMC from soliciting or entertaining other acquisition offers and the potential payment to Builders FirstSource by BMC of a termination fee of $66 million, as described in the section entitled “The Merger Agreement—Termination Fees” beginning on page 156;

 

   

the risk that the $100 million termination fee to which BMC may be entitled, subject to the terms and conditions of the merger agreement, in the event Builders FirstSource terminates the merger agreement in certain circumstances may not be sufficient to compensate BMC for the harm it might suffer as a result of such termination, as described in the section entitled “The Merger Agreement—Termination Fees” beginning on page 156;

 

   

the potential for litigation relating to the proposed merger and the associated costs, burden and inconvenience involved in defending those proceedings;

 

   

that certain provisions of the merger agreement, although reciprocal, restrict BMC’s ability to solicit, respond to and negotiate alternative transaction proposals from third parties; which may have the effect of discouraging alternative proposals involving BMC;

 

   

the restrictions in the merger agreement on the conduct of BMC’s business during the period between execution of the merger agreement and the completion of the merger, including that BMC must conduct its business only in the ordinary course, subject to specific limitations, which could negatively impact BMC’s ability to pursue certain business opportunities or strategic transactions;

 

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the risk that BMC stockholders or BFS stockholders, as applicable, may vote down the proposals at the BMC stockholder meeting or BFS stockholder meeting;

 

   

the risk that regulatory approvals for the merger may be delayed, objected to or challenged, or that the terms of such approvals may impose terms and conditions in order to resolve those objections that could adversely affect the financial results of the combined company; see the section entitled “The Merger—Regulatory Approvals” beginning on page 130;

 

   

the potential that the fixed exchange ratio under the merger agreement could result in BMC stockholders receiving less implied value per share of BMC common stock in the merger than had been anticipated by BMC should the value of the shares of BMC common stock increase relative to the value of BFS common stock prior to the date of completion of the merger;

 

   

the fees and expenses associated with completing the merger; and

 

   

the risks of the type and nature described above in “Risk Factors” and the matters described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on pages 43 and 40, respectively.

The BMC board of directors considered all of these factors as a whole and, on balance, concluded that it supported a favorable determination to approve the merger agreement and to make its recommendations to the BMC stockholders.

In addition, the BMC board of directors was aware of and considered the interests of its directors and executive officers that are different from, or in addition to, the interests of BMC stockholders generally, including the treatment of BMC stock options and other equity awards held by such directors and executive officers in the merger described in the section entitled “Interests of BMCs Directors and Executive Officers in the Merger beginning on page 178 and the obligation of the combined company to indemnify BMC directors and officers against certain claims and liabilities.

The foregoing discussion of the information and factors that the BMC board of directors considered is not intended to be exhaustive, but rather is meant to include the material factors that the BMC board of directors considered. The BMC board of directors collectively reached the conclusion to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement in light of the various factors described above and other factors that the members of the BMC board of directors believed were appropriate. In view of the complexity and wide variety of factors, both positive and negative, that the BMC board of directors considered in connection with its evaluation of the merger, the BMC board of directors did not find it practical, and did not attempt, to quantify, rank or otherwise assign relative or specific weights or values to any of the factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the BMC board of directors. In considering the factors discussed above, individual directors may have given different weights to different factors.

The foregoing description of BMC’s consideration of the factors supporting the merger is forward-looking in nature. This information should be read in light of the factors discussed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 40.

Opinion of Builders FirstSource’s Financial Advisor

On August 26, 2020, Rothschild & Co rendered its oral opinion to the BFS board of directors (which was subsequently confirmed in writing by delivery of Rothschild & Co’s written opinion addressed to the BFS board of directors dated the same date) to the effect that, as of such date and based upon and subject to the assumptions, qualifications, limitations and other matters set forth in its written opinion, the exchange ratio in the merger pursuant to the merger agreement was fair, from a financial point of view, to Builders FirstSource.

 

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Rothschild & Co’s opinion was provided for the benefit of the BFS board of directors, in its capacity as such, in connection with and for the purpose of its evaluation of the merger, and only addressed the fairness to Builders FirstSource, from a financial point of view, as of August 26, 2020, of the exchange ratio in the merger pursuant to the merger agreement. Rothschild & Co did not express any opinion as to Builders FirstSource’s underlying business decision to engage in the merger or the relative merits of the merger as compared to any alternative transaction. The summary of Rothschild & Co’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached as Annex C to this joint proxy statement / prospectus and which sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Rothschild & Co in preparing its opinion. Neither Rothschild & Co’s written opinion nor the summary of its opinion and the related analyses set forth in this joint proxy statement/prospectus are intended to be, and they do not constitute, a recommendation to any stockholder of Builders FirstSource or BMC (or any other security holders) as to how such stockholder (or other holder) should vote or act on any matter relating to the merger. Rothschild & Co’s opinion was given and spoke only as of the date thereof. Developments subsequent to the delivery of its opinion may affect its analyses and opinion, and the assumptions used in preparing them, and Rothschild & Co does not have any obligation to update, revise, or reaffirm its opinion.

In arriving at its opinion, among other things, Rothschild & Co:

 

   

reviewed a draft dated August 26, 2020 of the merger agreement;

 

   

reviewed certain publicly available business and financial information that Rothschild & Co deemed to be generally relevant concerning BMC, Builders FirstSource and the industries in which they operate, including certain publicly available research analyst reports;

 

   

compared the proposed financial terms of the merger with the publicly available financial terms of certain other transactions involving companies Rothschild & Co deemed generally relevant and the consideration received in such transactions;

 

   

compared the financial and operating performance of each of BMC and Builders FirstSource with publicly available information concerning certain public companies Rothschild & Co deemed generally relevant, including data related to public market trading levels and implied trading multiples;

 

   

reviewed the reported price and trading activity for shares of BMC common stock and BFS common stock, and compared that activity with the trading histories of each other and with other companies with publicly traded equity securities Rothschild & Co deemed generally relevant;

 

   

reviewed certain internal financial and operating information with respect to the business, operations and prospects of BMC furnished to or discussed with Rothschild & Co by the management of BMC, including certain financial forecasts relating to BMC prepared by the management of BMC, which are referred to in this section as the BMC forecasts and are summarized in the section entitled “The Merger—Certain Unaudited Prospective Financial Information—Certain BMC Stand-Alone Projections beginning on page 128;

 

   

reviewed certain financial forecasts relating to BMC prepared by the management of Builders FirstSource with and without giving effect to certain assumptions regarding future growth initiatives, which forecasts, including such assumptions regarding future growth initiatives, are referred to in this section as the BFS forecasts for BMC and are summarized in the section entitled “The Merger—Certain Unaudited Prospective Financial Information—Certain BFS Projections for BMC beginning on page 127;

 

   

reviewed certain internal financial and operating information with respect to the business, operations and prospects of Builders FirstSource furnished to or discussed with Rothschild & Co by the management of Builders FirstSource, including certain financial forecasts relating to Builders FirstSource prepared by the management of Builders FirstSource with and without giving effect to

 

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certain assumptions regarding future growth initiatives, which information, including such assumptions regarding future growth initiatives, is referred to in this section as the BFS forecasts and are summarized in the section entitled “The Merger—Certain Unaudited Prospective Financial Information—Certain BFS Stand-Alone Projections beginning on page 127;

 

   

reviewed certain estimates prepared by the management of Builders FirstSource regarding the amount and timing of cost savings and other synergies, net of costs necessary to achieve such cost savings and other synergies, anticipated by such management to result from the merger, which estimates are referred to in this section as the net synergies estimates and are summarized in the section entitled “The Merger—Certain Estimated Synergies beginning on page 129;

 

   

reviewed certain internal financial and operating information with respect to the business, operations and prospects of Builders FirstSource on a pro forma basis, giving effect to the completion of the merger, furnished to or discussed with Rothschild & Co by the management of Builders FirstSource, including certain pro forma financial forecasts relating to Builders FirstSource giving effect to the completion of the merger prepared by the management of Builders FirstSource, which are referred to in this section as the pro forma BFS forecasts and are summarized in the section entitled “The Merger—Certain Unaudited Prospective Financial Information—Certain Pro Forma BFS Projections beginning on page 128;

 

   

performed such other financial studies and analyses and considered such other information as Rothschild & Co deemed appropriate for the purposes of its opinion; and

 

   

held discussions with certain members of the management of each of BMC and Builders FirstSource regarding the merger, the past and current business operations and financial condition and prospects of BMC and Builders FirstSource, certain of the foregoing information and certain other matters Rothschild & Co believed necessary or appropriate to its inquiry.

In arriving at its opinion, with the consent of the BFS board of directors, Rothschild & Co relied upon and assumed, without independent verification, the accuracy and completeness of all information that was publicly available or was furnished or made available to it by Builders FirstSource, BMC and their respective associates, affiliates and advisors, or otherwise reviewed by or for it, and Rothschild & Co did not assume any responsibility or liability therefor. Rothschild & Co did not conduct any valuation or appraisal of any assets or liabilities of Builders FirstSource or BMC, nor were any such valuations or appraisals provided to it, and Rothschild & Co did not express any opinion as to the value of such assets or liabilities. Rothschild & Co did not evaluate the solvency or fair value of Builders FirstSource or BMC under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. In addition, Rothschild & Co did not assume any obligation to conduct any physical inspection of the properties or the facilities of Builders FirstSource or BMC. At the direction of the management of Builders FirstSource, Rothschild & Co used and relied upon the BFS forecasts for BMC, the BFS forecasts, the net synergies estimates and the pro forma BFS forecasts for purposes of its analyses and opinion. In relying on the BFS forecasts for BMC, the BFS forecasts and the pro forma BFS forecasts, Rothschild & Co assumed, at the direction of Builders FirstSource, that they had been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by Builders FirstSource’s management as to the expected future results of operations and financial condition of BMC, Builders FirstSource, and Builders FirstSource pro forma for the completion of the merger, respectively, and the other matters covered thereby. In relying on the net synergies estimates, Rothschild & Co assumed, at the direction of Builders FirstSource, that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by Builders FirstSource’s management as to the cost savings and other synergies, net of costs necessary to achieve such cost savings and other synergies, anticipated by such management to result from the merger. Rothschild & Co relied, at the direction of Builders FirstSource, on the assessments of Builders FirstSource’s management as to BMC’s ability to achieve the BFS forecasts for BMC and Builders FirstSource’s ability to achieve the BFS forecasts, the net synergies estimates and the pro forma BFS forecasts. Rothschild & Co expressed no view as to the reasonableness of any forecasts reviewed by it for purposes of its analyses or opinion, including the net synergies estimates, or the assumptions on which they are based.

 

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Rothschild & Co understood that the merger was intended to qualify, for U.S. federal income tax purposes, as a “reorganization” within the meaning of Section 368(a) of the Code. Rothschild & Co assumed that the transactions contemplated by the merger agreement would be completed as contemplated in the merger agreement without any waiver or amendment of any terms or conditions, including, among other things, that the parties would comply with all material terms of the merger agreement and that in connection with the receipt of all necessary governmental, regulatory or other approvals and consents required for the merger, no material delays, limitations, conditions or restrictions would be imposed. For purposes of rendering its opinion, Rothschild & Co assumed that there would not occur any material change in the assets, financial condition, results of operations, business or prospects of BMC or Builders FirstSource since the date of the most recent financial statements and other information, financial or otherwise, relating to BMC or Builders FirstSource, as the case may be, made available to Rothschild & Co, and that there was no information or any facts that would make any of the information reviewed by it incomplete or misleading. In addition, for purposes of its analyses and opinion, Rothschild & Co assumed that Builders FirstSource would not enter into any commitment or agreement or take any other action that would result in any adjustment to the exchange ratio pursuant to Section 3.2 of the merger agreement. Rothschild & Co did not express any opinion as to any tax or other consequences that may result from the merger, nor does its opinion address any legal, tax, regulatory or accounting matters. Rothschild & Co relied as to all legal, tax and regulatory matters relevant to rendering its opinion upon the assessments made by Builders FirstSource and its other advisors with respect to such issues. In arriving at its opinion, Rothschild & Co had not taken into account any litigation, regulatory or other proceeding that was pending or may be brought against Builders FirstSource, BMC or any of their respective affiliates. In addition, Rothschild & Co relied upon and assumed, without independent verification, that the final form of the merger agreement would not differ in any material respect from the draft of the merger agreement reviewed by it.

Rothschild & Co’s opinion was necessarily based on securities markets, economic, monetary and other general business and financial conditions as they existed and could be evaluated on, and the information made available to it as of, the date thereof and the conditions and prospects, financial and otherwise, of Builders FirstSource and BMC as they were reflected in the information provided to Rothschild & Co and as they were represented to Rothschild & Co in discussions with the management of each of Builders FirstSource and BMC. As the BFS board of directors was aware, the credit, financial and stock markets, and the industry in which Builders FirstSource and BMC operate, had been experiencing and may continue to experience volatility under then current and developing conditions, and Rothschild & Co expressed no opinion or view as to any potential effects of such volatility on BMC, Builders FirstSource or the merger. Rothschild & Co expressed no opinion as to what the value of shares of BFS common stock actually would be when issued pursuant to the merger or the prices or range of prices at which shares of BMC common stock or BFS common stock may be purchased or sold at any time. Rothschild & Co’s opinion is limited to the fairness, from a financial point of view, to Builders FirstSource of the exchange ratio in the merger pursuant to the merger agreement. Rothschild & Co did not express any opinion as to Builders FirstSource’s underlying business decision to engage in the merger or the relative merits of the merger as compared to any alternative transaction. Rothschild & Co was not asked to, nor did it, offer any opinion as to the terms, other than the exchange ratio in the merger and only to the extent expressly set forth in its written opinion, of the merger agreement or merger, including, without limitation, any ongoing obligations of Builders FirstSource or BMC.

Rothschild & Co’s opinion was provided for the benefit of the BFS board of directors, in its capacity as such, in connection with and for the purpose of its evaluation of the merger. Rothschild & Co’s opinion should not be construed as creating any fiduciary duty on its part to any party. Rothschild & Co’s opinion did not constitute a recommendation to the BFS board of directors as to whether to approve the merger or a recommendation to any security holder of Builders FirstSource or BMC as to how such security holder should vote or act on any matter relating to the proposed merger or any other matter. In addition, the BFS board of directors did not ask Rothschild & Co to address, and Rothschild & Co’s opinion did not address, (i) the fairness to, or any other consideration of, any holders of BFS common stock or BMC common stock, or the holders of any other class of securities, or creditors or other constituencies of Builders FirstSource or BMC or (ii) the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or

 

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employees of Builders FirstSource, BMC, or any class of such persons, whether relative to the exchange ratio pursuant to the merger agreement or otherwise.

In preparing its opinion to the BFS board of directors, Rothschild & Co performed a variety of analyses, including those described below. The following summary of Rothschild & Co’s financial analyses is not a complete description of the analyses underlying Rothschild & Co’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaptation and application of those methods to the unique facts and circumstances presented. As a consequence, neither Rothschild & Co’s opinion nor the analyses underlying its opinion are readily susceptible to partial analysis or summary description. Rothschild & Co arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, analytic method or factor. Accordingly, Rothschild & Co believes that its analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

In performing its analyses, Rothschild & Co considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness from a financial point of view to Builders FirstSource of the exchange ratio in the merger, Rothschild & Co did not make separate or quantifiable judgments regarding individual analyses. The reference ranges indicated by Rothschild & Co’s financial analyses are illustrative and not necessarily indicative of actual values nor predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which such assets, businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond Builders FirstSource’s control or Rothschild & Co’s control. Much of the information used in, and accordingly the results of, Rothschild & Co’s analyses are inherently subject to substantial uncertainty.

Financial Analyses

The following is a summary of the material financial analyses reviewed by Rothschild & Co with the BFS board of directors in connection with the rendering of its opinion to the BFS board of directors on August 26, 2020. The summary does not contain all of the financial data security holders of BFS may want or need for purposes of making an independent determination regarding the matters before them, and such holders are encouraged to consult their own financial and other advisors before making any investment decision in connection with the proposed merger. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses—as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis—could create a misleading or incomplete view of Rothschild & Co’s analyses.

For purposes of its analyses, Rothschild & Co reviewed a number of financial metrics including:

 

   

Enterprise Value—generally the value as of a specified date of the relevant company’s outstanding equity securities (taking into account its options and other outstanding convertible securities) plus the value as of such date of its net debt (the value of its outstanding indebtedness, preferred stock and finance lease obligations less the amount of cash).

 

   

Adjusted EBITDA—generally the amount of the relevant company’s earnings before interest, taxes, depreciation and amortization for a specified time period, adjusted to exclude certain non-recurring or other special items and stock-based compensation.

 

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Selected Public Companies Trading Analysis

Rothschild & Co considered certain financial data for Builders FirstSource, BMC and selected companies with publicly traded equity securities Rothschild & Co deemed relevant. Rothschild & Co used the same selected companies in its selected companies analysis for each of Builders FirstSource and BMC. The selected companies were selected because they were deemed to be similar to Builders FirstSource and BMC in one or more respects. The selected companies used in the selected companies analysis for comparative purposes to Builders FirstSource and BMC, other than Builders FirstSource and BMC, respectively, are not identical to Builders FirstSource or BMC, and an evaluation of the results of the selected companies analysis is not entirely mathematical. As a consequence, the ranges of multiples applied for purposes of the selected companies analysis were selected based on Rothschild & Co’s experience and judgment. Unless the context indicates otherwise, share prices for the selected companies used in the selected companies analysis described below were closing prices as of August 25, 2020. Estimates of future financial performance for the years ending December 31, 2020 and 2021 for the selected companies listed below, including Builders FirstSource and BMC, were based on publicly available research analyst estimates for those companies.

The financial data reviewed included:

 

   

Enterprise Value as a multiple of estimated Adjusted EBITDA for the year ended December 31, 2020, or “2020E EBITDA”; and

 

   

Enterprise Value as a multiple of estimated Adjusted EBITDA for the year ended December 31, 2021, or “2021E EBITDA.”

These selected companies, and the observed multiples, were:

 

Company Name

   Enterprise
Value/

2020E
EBITDA
     Enterprise
Value/

2021E
EBITDA
 

Beacon Roofing Supply, Inc.

     11.3x        10.6x  

BMC

     7.8x        7.3x  

Builders FirstSource

     8.5x        7.6x  

Foundation Building Materials, Inc.

     7.1x        6.7x  

GMS Inc.

     6.9x        7.0x  

UFP Industries, Inc.

     10.9x        10.2x  

The mean and median multiples of the financial data reviewed for the selected companies, based on publicly available research analyst estimates for the years ending December 31, 2020 and December 31, 2021, are:

 

Metric    Mean    Median
Enterprise Value / 2020E EBITDA    8.8x    8.2x
Enterprise Value / 2021E EBITDA    8.2x    7.5x

Taking into account the results of the selected companies analysis, Rothschild & Co applied multiple ranges of 7.75x to 9.25x to estimates of Builders FirstSource’s Adjusted EBITDA for the fiscal year ending December 31, 2020 based on the BFS forecasts and 7.00x to 8.50x to estimates of Builders FirstSource’s Adjusted EBITDA for the fiscal year ending December 31, 2021 based on the BFS forecasts. This analysis indicated implied per share equity value reference ranges for the BFS common stock of approximately $27.53 to $34.87 based on 2020E EBITDA and $28.39 to $36.69 based on 2021E EBITDA.

Taking into account the results of the selected companies analysis, Rothschild & Co applied multiple ranges of 7.25x to 8.75x to estimates of BMC’s Adjusted EBITDA for the fiscal year ending December 31, 2020 based on the BFS forecasts for BMC and 6.50x to 8.00x to estimates of BMC’s Adjusted EBITDA for the fiscal year ending December 31, 2021 based on the BFS forecasts for BMC. This analysis indicated implied per share equity value reference ranges for the BMC common stock of approximately $32.04 to $38.99 based on 2020E EBITDA and $33.05 to $41.03 based on 2021E EBITDA.

 

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The foregoing analyses indicated implied exchange ratio ranges of 0.92x to 1.42x based on 2020E EBITDA and 0.90x to 1.45x based on 2021E EBITDA, in each case without giving effect to the net synergies estimates, as compared to the exchange ratio of 1.3125x provided for in the merger pursuant to the merger agreement.

Selected Precedent Transactions Analysis

Rothschild & Co considered the financial terms of certain business combinations and other transactions that had previously been announced and which Rothschild & Co deemed relevant. Rothschild & Co used the same transactions in its selected transactions analysis of each of Builders FirstSource and BMC. The selected transactions were selected because the target companies were deemed similar to Builders FirstSource and BMC in one or more respects. None of the selected transactions used for comparative purposes is identical to a transaction involving Builders FirstSource or BMC on the date of the announcement of the merger, and an evaluation of the results of the selected transactions analysis is not entirely mathematical. As a consequence, the ranges of multiples applied for purposes of the selected transactions analysis were selected based on Rothschild & Co’s experience and judgment. Financial data for the selected transactions were based on public filings, publicly available research analyst estimates and other publicly available information.

The financial data reviewed for the selected transactions analyses included the Enterprise Value implied by the consideration proposed or paid in the selected transactions as a multiple of the target companies’ then latest 12 months’ Adjusted EBITDA as of the date of announcement of the transaction.

These selected transactions, and the observed multiples, were:

 

Date

Announced

 

Acquiror

 

Target

   Enterprise
Value/
LTM
EBITDA

08/20

  Clayton, Dubilier & Rice   Construction Supply Group    N.A.

08/20

  Clayton, Dubilier & Rice   HD Supply Holdings, Inc.’s Construction & Industrial – White Cap Business    9.0x

05/19

  Kyocera Corporation   SouthernCarlson, Inc.    N.A.

05/18

  Reece Limited   Morsco Inc.    14.4x

04/18

  Leonard Green & Partners   SRS Distribution Inc.    N.A.

04/18

  GMS Inc.   WSB Titan    9.2x

01/18

  HD Supply Holdings, Inc.   A.H. Harris Construction Supplies, Inc.    N.A.

08/17

  Beacon Roofing Supply, Inc.   Allied Building Products Corp.    13.6x

06/17

  Clayton, Dubilier & Rice   HD Supply Holdings, Inc.’s    10.5x
    Waterworks Business   

08/16

  ABC Supply Co., Inc.   L&W Supply    12.9x

06/16

  Kelso & Company   SouthernCarlson, Inc.    N.A.

07/15

  Beacon Roofing Supply, Inc.   Roofing Supply Group    14.6x

07/15

  The Home Depot, Inc.   Interline Brands, Inc.    11.1x

06/15

  Stock Building Supply Holdings, Inc.   Building Materials Holding Corporation    11.4x

04/15

  Builders FirstSource, Inc.   ProBuild Holdings LLC    9.6x

05/14

  CCMP Capital Advisors, LLC   The Hillman Companies, Inc.    11.7x

02/14

  AEA Investors   Gypsum Management & Supply, Inc.    10.0x

02/13

  Berkshire Partners   SRS Distribution Inc.    N.A.

05/12

  GS Capital Partners and   Interline Brands, Inc.    9.7x
  P2 Capital Partners     

 

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Date

Announced

 

Acquiror

 

Target

   Enterprise
Value/
LTM
EBITDA

09/10

  Hellman & Friedman   Associated Materials Incorporated    9.0x

04/10

  Oak Hill Capital Partners   The Hillman Companies, Inc.    10.0x

06/07

  Bain Capital Partners, The Carlyle Group & Clayton, Dubilier & Rice   HD Supply Holdings, Inc.    8.5x

01/06

  Pro-Build Holdings Inc.   Lanoga Corporation    N.A.

01/06

  The Home Depot, Inc.   Hughes Supply, Inc.    11.4x

The mean and median multiples of the financial data reviewed for the selected transactions, based on publicly available information, were:

 

Metric    Mean    Median
Enterprise Value / Last Twelve Months (LTM) Adjusted EBITDA (All selected transactions)    11.0x    10.5x
Enterprise Value / LTM Adjusted EBITDA (Excluding Roofing & Plumbing Transactions)    10.3x    10.0x

Taking into account the results of the selected transactions analysis, Rothschild & Co applied multiple ranges of 9.00x to 11.00x to LTM Adjusted EBITDA for the 12 months ended June 30, 2020 for each of Builders FirstSource and BMC, based on information provided by Builders FirstSource and BMC. This analysis indicated an implied per share equity value reference range for (a) the BFS common stock of approximately $29.50 to $38.36 and (b) the BMC common stock of approximately $35.63 to $43.89.

The foregoing analyses indicated an implied exchange ratio range of 0.93x to 1.49x, without giving effect to the net synergies estimates, as compared to the exchange ratio of 1.3125x provided for in the merger pursuant to the merger agreement.

Discounted Cash Flow Analysis

Rothschild & Co performed a discounted cash flow analysis of each of Builders FirstSource and BMC on a stand-alone basis by calculating the estimated net present value of the projected after-tax, unlevered free cash flows of Builders FirstSource and BMC based on the BFS forecasts and the BFS forecasts for BMC, respectively, in each case without giving effect to the net synergies estimates. Based on its judgment and experience, with respect to Builders FirstSource, Rothschild & Co applied a range of perpetuity growth rates of 2.00% to 2.50% to derive an estimated terminal value and discount rates ranging from 9.0% to 10.0%. Based on its judgment and experience, with respect to BMC, Rothschild & Co applied a range of perpetuity growth rates of 2.00% to 2.50% to derive an estimated terminal value and discount rates ranging from 8.6% to 9.6%. This analysis indicated an implied per share equity value reference range for (a) the BFS common stock of approximately $32.77 to $44.46 and (b) for the BMC common stock of approximately $37.95 to $49.45.

The foregoing analysis indicated an implied exchange ratio range of 0.85x to 1.51x, without giving effect to the net synergies estimates, as compared to the exchange ratio of 1.3125x provided for in the merger pursuant to the merger agreement.

Pro Forma Combined Company Discounted Cash Flow Analysis

Rothschild & Co reviewed a comparison of the stand-alone equity value reference range per share of BFS common stock indicated by the discounted cash flow analysis described above with the implied equity value reference range, which is referred to as the Pro Forma BFS Share Value, per share of BFS common stock

 

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indicated by the net present value of the projected after-tax, unlevered free cash flows of the pro forma combined company using the pro forma BFS forecasts which give effect to the completion of the merger and the net synergies estimates. Based on its judgment and experience, Rothschild & Co applied a range of perpetuity growth rates of 2.00% to 2.50% to derive an estimated terminal value and discount rates ranging from 8.5% to 9.5%. The illustrative Pro Forma BFS Share Value indicated by this analysis ranged from $35.76 to $47.23, as compared to the implied per share equity value reference range for Builders FirstSource indicated by Rothschild & Co’s discounted cash flow analysis described above of $32.77 to $44.46.

Rothschild & Co also showed for reference purposes this comparison using terminal multiples to derive estimated terminal values, applying terminal multiples, based on its judgment and experience, of 7.75x to 8.75x to terminal year Adjusted EBITDA based on the BFS forecasts and the pro forma BFS forecasts. This exercise indicated an illustrative Pro Forma BFS Share Value ranging from $34.94 to $41.48, as compared to an implied per share equity value reference range for Builders FirstSource indicated by the discounted cash flow analysis using this approach of $34.52 to $42.15.

Other Analyses and Information

Rothschild & Co also reviewed and considered certain additional factors that were not considered part of its material financial analyses with respect to its opinion, but which were noted for informational purposes for the BFS board of directors, including:

 

   

the premia implied by the exchange ratio in the merger pursuant to the merger agreement relative to the historical exchange ratio for BFS common stock and BMC common stock based on their respective closing stock prices as of certain dates and periods. This analysis indicated premia for the exchange ratio in the merger pursuant to the merger agreement to the historical exchange ratios for BFS common stock and BMC common stock of: 13.7% (based on closing stock prices for BFS common stock and BMC common stock on August 25, 2020), 9.0% (based on the six month trading averages of BFS common stock and BMC common stock to August 25, 2020), 9.5% (based on the one year trading averages of BFS common stock and BMC common stock to August 25, 2020), 3.6% (based on the two year trading averages of BFS common stock and BMC common stock to August 25, 2020), and 7.8% (based on the three year trading averages of BFS common stock and BMC common stock to August 25, 2020); and

 

   

the relative ownership in the combined company by the stockholders of Builders FirstSource and BMC, respectively, after giving effect to the merger, as compared with the relative stand-alone contributions to certain financial metrics of Builders FirstSource and BMC, without giving effect to the net synergies estimates. This analysis indicated implied stand-alone contributions by Builders FirstSource ranging from approximately 58-61% (based on annual revenue for each of 2020-2022 indicated in the BFS forecasts and the BFS forecasts for BMC), approximately 58% (based on annual Adjusted EBITDA for each of 2020-2022 indicated in the BFS forecasts and the BFS forecasts for BMC), approximately 62%-63% (based on annual net income for each of 2020-2022 indicated in the BFS forecasts and the BFS forecasts for BMC), and approximately 60% (based on equity values for Builders FirstSource and BMC as of August 25, 2020 based on Builders FirstSource’s and BMC’s respective closing stock prices for such date), as compared to the implied ownership of BFS stockholders in the combined company resulting from the merger of 57%.

Other Matters

Builders FirstSource retained Rothschild & Co as its financial advisor in connection with the merger based on its qualifications, experience, and reputation, and Rothschild & Co will receive a fee from Builders FirstSource for its services. Pursuant to the engagement letter between Builders FirstSource and Rothschild & Co, Builders FirstSource has agreed to pay Rothschild & Co a fee of $12,000,000 for its services, of which $2,000,000 became payable to Rothschild & Co upon the execution of the merger agreement and the remainder

 

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of which is contingent upon the completion of the merger. In addition, Builders FirstSource has agreed to reimburse certain of Rothschild & Co’s expenses and to indemnify Rothschild & Co against certain liabilities that may arise out of its engagement.

Rothschild & Co and its affiliates are engaged in a wide range of financial advisory and investment banking activities. In addition, in the ordinary course of their asset management, merchant banking and other business activities, affiliates of Rothschild & Co may trade in the securities of Builders FirstSource, BMC and their respective affiliates, for their own accounts or for the accounts of their affiliates and customers, and may at any time hold a long or short position in such securities.

Rothschild & Co and its affiliates have provided, and are currently providing, financial advisory services to Builders FirstSource, including advising Builders FirstSource on potential acquisitions, divestitures and other strategic advisory matters, for which Rothschild & Co. has received aggregate fees of approximately $550,000 during the two-year period preceding delivery of its opinion and may in the future receive additional fees. In addition, Rothschild & Co and its affiliates may in the future provide investment banking and other financial advice and services to Builders FirstSource, BMC and their respective affiliates and may receive fees for the rendering of such services.

Opinion of BMC’s Financial Advisor

At the meeting of the BMC board of directors on August 26, 2020 to evaluate and approve the merger agreement and the transactions contemplated by the merger agreement, Moelis delivered an oral opinion, which was confirmed by delivery of a written opinion, dated August 26, 2020, addressed to the BMC board of directors to the effect that, as of the date of the opinion and based upon and subject to the assumptions made, procedures followed, matters considered and other limitations set forth in the opinion, the exchange ratio in the merger was fair, from a financial point of view, to the holders of BMC common stock.

The full text of Moelis’ written opinion dated August 26, 2020, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. Moelis’ opinion was provided for the use and benefit of the BMC board of directors (solely in its capacity as such) in its evaluation of the merger. Moelis’ opinion is limited solely to the fairness, from a financial point of view, of the exchange ratio to the holders of BMC common stock, and does not address BMC’s underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that might be available to BMC. Moelis’ opinion does not constitute a recommendation as to how any holder of securities of BMC or Builders FirstSource should vote or act with respect to the merger or any other matter.

In arriving at its opinion, Moelis, among other things:

 

   

reviewed certain publicly available business and financial information, including publicly available research analysts’ financial forecasts, relating to BMC and Builders FirstSource;

 

   

reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of BMC furnished to Moelis by BMC, including the BMC stand-alone projections described in the section entitled “The Merger—Certain Unaudited Prospective Financial Information—Certain BMC Stand-Alone Projections” beginning on page 128;

 

   

reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of Builders FirstSource furnished to Moelis by Builders FirstSource, including the BMC projections for BFS described in the section entitled “The Merger—Certain Unaudited Prospective Financial Information—Certain BMC Projections for BFS beginning on page 129 and which are referred to collectively with the BMC stand-alone projections as the BMC projected financial information;

 

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reviewed certain internal information relating (i) to net synergies estimates described in the section entitled “The Merger—Certain Estimated Synergies beginning on page 129 and (ii) certain other pro forma financial effects of the merger furnished to Moelis by the managements of BMC and Builders FirstSource;

 

   

reviewed capitalization information for BMC and Builders FirstSource, including pro forma for the merger, provided to Moelis by the managements of BMC and Builders FirstSource;

 

   

conducted discussions with members of the senior managements and representatives of BMC and Builders FirstSource concerning the information described in the foregoing five bullets, as well as the businesses and prospects of BMC and Builders FirstSource generally;

 

   

reviewed publicly available financial and stock market data of certain other companies in lines of business that Moelis deemed relevant;

 

   

reviewed the financial terms of certain other transactions that Moelis deemed relevant;

 

   

reviewed the merger agreement;

 

   

participated in certain discussions and negotiations among representatives of BMC and Builders FirstSource and their advisors; and

 

   

conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate.

In connection with its review, Moelis has, with the consent of the BMC board of directors, relied on the information supplied to, discussed with or reviewed by it for purposes of its opinion being complete and accurate in all material respects. Moelis did not assume any responsibility for independent verification of (and did not independently verify) any of such information. With the consent of the BMC board of directors, Moelis relied upon, without independent verification, the assessment of BMC and its legal, tax, regulatory and accounting advisors with respect to legal, tax, regulatory and accounting matters. With respect to the BMC projected financial information and other information provided to Moelis by the management of BMC or Builders FirstSource, as applicable, relating to BMC, Builders FirstSource, the net synergies estimates and other pro forma financial effects referred to above, Moelis assumed, at the direction of the BMC board of directors, that they have been reasonably prepared on a basis reflecting the best then available estimates and judgments of the management of BMC or Builders FirstSource, as the case may be, as to the future performance of BMC and Builders FirstSource, the net synergies estimates (including the amount, timing and achievability thereof) and such other pro forma financial effects. Moelis also assumed, at the direction of the BMC board of directors, that the future financial results (including net synergies estimates and other pro forma financial effects) reflected in such forecasts and other information would be achieved at the times and in the amounts projected. In addition, at the direction of the BMC board of directors, Moelis relied on the assessments of the managements of BMC and Builders FirstSource as to Builders FirstSource’s ability to retain key employees of BMC and to integrate the businesses of BMC and Builders FirstSource. Moelis did not express any views as to the reasonableness of any financial forecasts or the assumptions on which they were based. Furthermore, with the consent of the BMC board of directors, Moelis did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of BMC or Builders FirstSource, nor was it furnished with any such evaluation or appraisal.

Moelis’ opinion did not address BMC’s underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that might be available to BMC and did not address any legal, regulatory, tax or accounting matters. At the direction of the BMC board of directors, Moelis was not asked to, and Moelis did not, offer any opinion as to any terms of the merger agreement or any aspect or implication of the merger, except for the fairness of the exchange ratio from a financial point of view to the holders of BMC common stock. Moelis’ opinion relates to the relative values of BMC and Builders FirstSource. With the consent of the BMC board of directors, Moelis did not express any opinion as to what the

 

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