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Connecticut-based QXO Inc. has launched an unsolicited offer to acquire GMS Inc., a major building materials distributor, in a $5 billion all-cash proposal that sent shockwaves through the market. The bid, revealed in a letter dated Wednesday, offers $95.20 per share, representing a 27% premium over GMS's 60-day volume-weighted average price of $74.82.

The market responded immediately. On Friday, the first trading day after QXO’s proposal became public, GMS stock surged nearly 24%, breaking through the $100-per-share mark, a strong indication of investor optimism or anticipation of a bidding war.

QXO Positions Bid as Immediate, Certain Value

In its public statement, QXO Chair and CEO Brad Jacobs called the offer a compelling and fully financed proposal that would deliver "immediate and certain value" to GMS shareholders.

"Our all-cash proposal to acquire GMS for $95.20 per share delivers immediate and certain value to GMS shareholders at a meaningful premium," said Jacobs.

QXO is backed by legal powerhouse Paul Weiss Rifkind Wharton & Garrison LLP, while Goldman Sachs and Morgan Stanley are serving as its financial advisers.

GMS Urges Caution as Board Reviews Proposal

On Thursday, GMS confirmed receipt of the unsolicited takeover offer and stated its board of directors would carefully evaluate the proposal with help from independent legal and financial advisers. For now, the company has advised shareholders to take no action until a formal review is complete.

Alston & Bird LLP is representing GMS on the legal front, while Jefferies is acting as the company’s financial adviser.

QXO Criticizes GMS’s Financial Performance

In the proposal letter addressed to GMS President and CEO John Turner, QXO laid out a critical assessment of GMS’s recent financial performance. The letter stated that GMS has underperformed peers, with profits dropping approximately 4% annually over the past three years and earnings falling short in four of the last five quarters.

The letter highlighted troubling declines in revenue, EBITDA, earnings per share, and described what it called a "sharp decline in performance."

Despite those concerns, QXO emphasized that the offer was generous, calling it “a full and compelling offer at the high end of our valuation range.”

Ready to Move Fast

QXO says it has secured financial backing for the acquisition and does not expect regulatory or antitrust issues to stand in the way. The company asked for a response from GMS by Tuesday, stating that it is prepared to complete due diligence and negotiate a deal within two weeks.

“We don’t play games — we’re straightforward and we move fast,” the letter read. “Our team and our advisors are standing by.”

Part of a Bigger Acquisition Strategy

The GMS bid follows QXO’s recent acquisition of Beacon Roofing Supply Inc., which closed in April. In that case, Beacon’s board initially rejected QXO’s overtures before unanimously recommending the finalized deal to shareholders.

With QXO’s reputation for aggressive deal-making and its track record of fast execution, this latest move could be a defining shake-up in the competitive landscape of the building materials and distribution sector.