NCI Buildings Closes Metl-Span Deal

NCI Buildings Systems, Inc. ( NCS - Analyst Report ) has wrapped up the purchase of Metl-Span LLC, the leading insulated metal panel supplier, for $145 million in cash. It has been incorporated in the Metal Components business unit of the company.

Metl-Span is a leader in the advancement of insulated panel technology. Along with its energy efficient and cost effective insulated metal wall and roof panels, it serves industries like Architectural, Commercial, Industrial and Cold Storage.

Separately, NCI Buildings also completed the refinancing of its existing term loan with a $250 million senior secured credit facility. The company will use about $40 million cash on hand as well as the proceeds from the new term loan to finance the acquisition, repay the existing term loan facility and meet the expenses related to the acquisition and refinancing.

The deal benefits NCI Buildings in diversifying its manufacturing capacity along with expanding the customer base in the fields of insulated metal panel. Moreover, it will position NCI Buildings as a market leader in the fully-integrated supplier to the nonresidential building products industry.

NCI Building has been hard hit by the continued weakness prevailing in the non-residential construction business. The company is still coping up with the soft demand coupled with tight credit obligations.

NCI Buildings reported an adjusted loss of 45 cents per share in the second-quarter of fiscal 2012, higher than the Zacks Consensus Estimate of a loss of 39 cents but lower than the year-ago quarter’s loss of 48 cents.

The company has incurred losses for ten straight quarters so far. According to a report by McGraw Hill ( ) , low-rise nonresidential construction starts (in square feet) decreased by 13.5% in the second quarter from the comparable period in fiscal 2011.

However, McGraw Hill forecasts that activity in non-residential construction would remain higher by 2 percentage points in 2012 (measured in square feet) compared to 2011. Moreover, it predicts that square footage would remain at 690 million in 2012, up from 678 million in 2011. According to the report, the major ramp up will happen in the second half of 2012.

NCI Building faces competition from privately held companies like American Buildings Company, Butler Manufacturing Company and Varco Pruden Buildings. The stock retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on the company.