Universal Forest To Buy North American Container Assets

Universal Forest Products, Inc. (NASDAQ:UFPI) yesterday announced that one of its subsidiaries will acquire majority assets of Marietta, GA-based North American Container Corporation. Financial consideration of the buyout has not been disclosed.

North American Container Corporation specializes in making structural packaging products — including wood/corrugated, laminated bulk boxes, wood replacement, recyclable and reusable packaging products. Its nine production facilities in Wisconsin, South Carolina, Tennessee and Georgia enable it to cater to customers’ demand effectively. Founded in 1967, its revenues in 2017 totaled $71 million.

Details of Buyout

As noted, the addition of North American Container’s assets will strengthen Universal Forest’s product portfolio and customer base by bringing corrugated, steel and hardwood packaging solutions under one roof. Also, the buyout will enable the company to leverage benefits by penetrating into growth markets as well as enhance its technological expertise.

North American Container will be integrated with Universal Forest’s Industrial segment. In 2017, the company generated roughly 33.3% of its gross sales (summation of segmental sales) from this segment. On a year-over-year basis, the segment’s sales grew 35% in 2017.

The buyout will be completed by Jun 1, 2018.

Universal Forest’s Inorganic Initiatives: A Boon

The above-mentioned transaction is consistent with Universal Forest’s policy of acquiring meaningful businesses to gain access to new customers, regions and product lines. In this regard, acquisitions of certain assets of Quality Hardwood Sales, LLC as well as buyouts of Robbins Manufacturing Company and Go Boy Pallets, LLC in 2017 are worth mentioning. The acquired assets of Quality Hardwood Sales and Robbins Manufacturing have strengthened the company’s position in the hardwood products market while Go Boy Pallets acquisition has helped it expand in the industrial packaging industry.

In addition, the idX buyout, completed in 2016, is projected to generate $290 million in revenues while saving on costs in 2018.

Universal Forest also believes in disposing of non-core assets. In January 2018, it sold its Medley, FL-based property in a bid to improve its operational efficiency and optimize the use of its resources.

Zacks Rank & Key Picks

With a market capitalization of nearly $2 billion, Universal Forest currently carries a Zacks Rank #2 (Buy). Earnings estimates for the stock for 2018 were increased by one brokerage firm in the last 60 days. It is pegged at $2.35, reflecting growth of 7.3% from the 60-day-ago tally.

Universal Forest Products, Inc. Price and Consensus