Gibraltar Industries is going green.
The Hamburg-based construction products manufacturer branched out into the solar energy industry with its $130 million deal to buy a Cincinnati-based company that makes racking systems for mounting solar panels on roofs.
Gibraltar executives described the deal as the first step under its new CEO toward transforming the construction products maker into a faster-growing and more profitable business that focuses more intently on its biggest customers and the products that generate the greatest sales and profits.
In the acquisition, Gibraltar is buying RBI Solar, also known as Rough Brothers Manufacturing, as part of its push into the solar energy industry – an area that new CEO Frank Heard had identified as a targeted area for new growth.
Rough Brothers, which has 300 employees, gets about two-thirds of its $164 million in annual revenues from making the racking systems that hold the solar panels in a rooftop solar energy system – a market that is forecast to grow by 14 percent annually over the next four years.
Heard described the solar racking industry as being “highly fragmented,” with 90 companies in the U.S. competing in a $2.1 billion market. RBI has about a 5.5 percent share of the market, with “the lion’s share” of its revenues coming from North America.
“They are growing rapidly,” Heard said. “They essentially came from zero five years ago.”
The push into solar is part of Heard’s strategy to turn around Gibraltar’s business, which was hurt badly by the collapse of the nation’s housing and construction markets during the Great Recession. While the company’s sales have been rising over the past four years, its profitability sagged last year.
As a result, Heard has refocused Gibraltar on its postal products, residential air management and infrastructure businesses, and is targeting the renewable energy, water management and outdoor living sectors as new areas for potential growth and acquisitions. The RBI deal is the first move by Gibraltar to push into one of those new markets.
“These are high-growth markets that are technologically rich,” Heard said. “It’s a technology play to move into the North American residential rooftop market.”
The deal announcement pushed Gibraltar’s stock to its highest levels since July 2008, with the shares rising by 8 percent, or $1.55 per share, to $20.01.
RBI is a leading supplier of rooftop racking systems and ground-mounted systems in Europe and Gibraltar executives said the company has been the fastest-growing racking systems supplier in North America over the past five years. RBI also sells its solar products in the fast-growing Japanese market and the company has plans to expand in South America and the Middle East.
“Acquiring RBI is an important step in the transformation of Gibraltar into a company with a higher rate of growth and best-in-class financial metrics,” Heard said during a conference call. “Adding RBI not only accelerates our entry into this attractive and fast-growing sector, but also broadens our portfolio of products serving critical infrastructure markets around the world.”
The acquisition pushes Gibraltar into the solar racking business at a time when the solar industry is taking a more prominent role in the Buffalo Niagara economy, with the ongoing construction of the SolarCity solar panel factory in Buffalo that is expected to create 2,900 factory and supplier jobs in the region. SolarCity, which is building the factory as an in-house source of high-efficiency solar panels, made its own foray into the racking systems business in October 2013, when it paid $158 million to acquire Zep Solar and turn it into its in-house supplier of racking systems.
Gibraltar said the acquisition is expected to add $115 million to $120 million to its sales during the second half of this year and boost its earnings, adjusted for one-time expenses stemming from the purchase, by 17 cents to 21 cents per share. Heard said RBI’s sales typically are stronger during the second half of the year, as the weather improves, with the company’s revenues also growing in line with the 14 percent industry growth rate.
“RBI will provide us with a new array of component products adjacent to Gibraltar’s core business, while also enabling us to leverage our global sourcing network and experience in manufacturing,” he said.
RBI, which was founded 80 years ago, established itself as the biggest greenhouse manufacturer in North America before its foray into solar, building on a growing interest in gardening among Baby Boomers. The company’s long-time owner, Albert Reilly, died in October 2013. His son, Richard, became president of Rough Brothers in 2002.
“Becoming part of Gibraltar will enable us to achieve our strategic growth objectives faster than we could on our own,” Richard Reilly said. “Our product portfolios and the end markets we serve are truly complementary to Gibraltar’s strategic direction, and Gibraltar’s core strengths align very well with ours, both operationally and culturally.”