Even as the once-booming U.S. housing market falters, Gibraltar Industries, Inc. announced its acquisition of Quality Aluminum Products for $54 million. Gibraltar Industries provides products and services for residential, renewable energy, and infrastructure markets while Quality Aluminum Products focuses on residential building products. The deal was announced as home builder confidence fell for the eighth straight month.
Gibraltar views the timing as an opportunity. Chairman and CEO Bill Bosway touted the all cash acquisition, stating in the companies’ joint press release, “Adding a market leader like QAP supports our overall objective of accelerating growth, earnings, and market participation while also adding a best-in-class operating team to the Gibraltar organization.
Residential construction faces a storm on three fronts: supply chain disruptions, record high home prices, and now rapidly rising mortgage rates. The pandemic created logistical nightmares for the supplies crucial to all facets of the U.S. economy. The pandemic led to a record breaking disconnect between supply and demand as skyrocketing costs, worker shortages, and unprecedented spikes in demand led to violent supply and price fluctuations. Aluminum, a key component in QAP’s production presents an example of the spike and then crash of prices.
Aluminum Prices
Source: https://markets.businessinsider.com/commodities/aluminum-price
Second, housing prices have jumped by record amounts in the wake of the covid shutdowns of 2020. In 2021 alone, home prices jumped by 16.9%, the highest on record. These increases have priced many Americans out of the market and have had a chilling effect on construction.
Source: https://www.statista.com/chart/27405/us-median-home-price-days-on-the-market/
Finally, mortgage prices have most recently jumped at record rates. As the Federal Reserve seeks to tame the inflation related to the jumps in prices discussed above, it has raised the federal funds benchmark rate to help quell demand and keep prices from rising. While the Fed has so far been unable to tame inflation, it has most recently implemented two consecutive “jumbo” rate hikes in June and July of 0.75% each – and another large hike is expected when the Fed meets later this month. Mortgage rates have doubled in the past nine months, surpassing 6% for the first time since 2008.
Gibraltar Industries sees the present as an opportune time to use its cash reserves on this acquisition.
