Clayton Dubilier & Rice took another step towards fully monetizing its large stake in Core & Main, offloading US$537m of shares via a block trade in the water pipe and drainage products distributor late on Wednesday.
In a busy evening for the private equity firm, CD&R separately sold US$400.5m of shares or about half of its remaining stake in Beacon Roofing Supply through a similar risk trade.
The Core & Main block saw Citigroup and JP Morgan join forces to reoffer 15m shares or about 7% of the company at US$35.80, the bottom of the US$35.80-$36.25 marketing range and a 3.8% discount to last sale.
The shares were trading at US$36.38 or comfortably above the offering price in Thursday's aftermarket.
Core & Main bought back 5m shares or about a third of the offering to ease execution, a well-worn tactic used on CD&R's previous sell-downs.
The combination enabled CD&R to cut its economic interest to about 24% with a 45-day lockup on further sales.
The latest offering came just a month after CD&R’s last Core & Main sell-down and marked its fifth sell-down of the name this year in arguably 2023's most successful sponsor monetization this year via secondary ECM.
Each offering priced at a incrementally higher price, netting CD&R more than US$2bn proceeds on top of several sell-downs last year (seven in all since Core & Main went public on the NYSE at US$20 per share in July 2021).
Helping the process, Core & Main shares have nearly doubled this year.
RBC Capital Markets acted as sole bookrunner on the Beacon block, reoffering 5m of CD&R's shares at US$80.10, the bottom of the US$80.10-$82.15 marketing range and a 2.5% discount to last sale (also US$82.15).
In Thursday's aftermarket, Beacon shares fell to US$79.95 or below the reoffer price.
The sale enabled CD&R to halve its remaining 10.2m shares or 16.1% stake to 5.2m/8.2% (and to 4.8m/7.1% if the shoe is exercised) with a 30-day lockup on further sales.
In this case, CD&R was biting the bullet since its last sell-down in August via Morgan Stanley (also 5m shares) was struck at the higher price of US$83.65.
Though another lucrative investment demonstrating CD&R’s penchant for distribution businesses and helping them consolidate fragmented markets, Beacon has been a slower monetisation exercise than Core & Main.
CD&R took a large stake after selling rival Roofing Supply to Beacon for US$1.1bn in cash and stock in 2015 (when Beacon stock was trading around the US$30.00 mark).
The latest sell-down came two days after Beacon said its chief financial officer was leaving to become CEO of another public company outside the building products sector. Alongside that announcement, Beacon reaffirmed its full-year guidance for adjusted Ebitda of US$910m-$930m.