Construction supplier is owned by Fidelity Investments
Everyone knows Fidelity Investments as one of the largest financial service companies in the world. But few know that its parent company, FMR LLC, owns a dozen diversified companies, including a tomato farm in Maine, a limousine service, a temporary staffing firm, and the second largest building materials supplier company in the country, ProBuild Holdings.
ProBuild, headquartered in Denver, Colorado, is owned by Fidelity’s investment arm, Devonshire Investors. Until recently it was the largest building supplies company in the U.S. according to ProSales magazine http://www.prosalesmagazine.com/. That changed when ABC Supply, ProBuild’s major competitor, completed its acquisition of Bradco Supply last week.
But ProBuild, despite the downturn in construction spending, continues to grow in selective geographical areas.
Also last week, ProBuild reached an agreement to purchase some of the assets of Chopp Lumber, a building materials supplier based in Waldorf, Md., and also announced the opening of a new millwork facility in San Antonio, Texas.
The transactions give ProBuild an increased presence in two of the top 20 housing markets in the country, both of which analysts predict will see significant growth in the next several years.
The Maryland location will supply trusses, wall panels and lumber to the residential and commercial markets of the greater Washington, D.C market and southern Maryland. The new location follows ProBuild's opening of a components manufacturing facility in Winchester, Va., this past March to serve the western and northern segments of Metro DC.
The new millwork facility in San Antonio enables ProBuild to serve the market more quickly and efficiently than had been the case from its millwork operation in Austin.
"These are two very important markets for us," said ProBuild CEO Paul Hylbert. "Our teams in both areas understand this, and the combination of their local market expertise and ProBuild's national scope will be of tremendous value to our customers in these markets."
The new facilities in Maryland and Texas build upon ProBuild's national presence of more than 470 centers in 42 states and follow its acquisition in May of Oso Lumber in the greater Seattle market. ProBuild has sales of more than $4 billion and employs nearly 12,000.
But ProBuild, like many construction distributors, has been severely impacted by the four-year-old housing downturn. The company has closed more than 60 locations in recent years but continues to grow through acquisitions, expanding its geographical reach.
A recent story in the Boston Globe http://www.boston.com/ pointed out that the deep decline in construction, has caused ProBuild to accrue hundreds of millions of dollars in losses for Fidelity.
The Globe based some of its story on a Standard & Poor's report that said Fidelity spent $345 million over six months in 2009 to cover losses at ProBuild. The Globe article said it could be on the hook for another $105 million through this year under a recapitalization plan for the firm, quoting a recent story from the Reuters news agency, citing a confidential prospectus for a Fidelity debt offering. The report predicted ProBuild will again lose money this year, though not nearly as much as it did in 2009.
Company officials said ProBuild is positioning itself for growth when the housing industry recovers, with an experienced management team in place and the hiring of key sales personnel in its facilities throughout the country.
Meanwhile, ProBuild’s parent company, Fidelity, continues to do extremely well in a challenging economic environment. Its financial services group remains solidly in the black. Fidelity reported operating income of $2.5 billion last year, up from $2.4 billion in 2008, even though its revenue fell 11 percent to $12.9 billion. Standard & Poor’s noted that Fidelity’s operating margins were higher because of both the stock market rebound and significant reductions in headcount. Fidelity cut its worldwide payroll from 46,500 employees at the end of 2007 to about 37,000 today, according to the Globe report.