Building Drama - BLG

By Dr. Duru written for One-Twenty

May 26, 2007

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One piece of the puzzle for Building Materials Holding Corp (BLG) has finally materialized. A major shareholder has begun agitating for some kind of liquidity event for the company. reports the following on Friday night from a recent SEC filing:

"7.4% holder Chap Cap Activist Partners files SC 13D/A,strongly recommends the company engage financial advisors to explore sale of company. From filing: "Chapman Capital, on behalf of what it believes is a significant percentage of BMHC's owners, strongly recommends that the Company engage financial advisors to explore the complete or divisional sale of the Company... Having recently made personal contact with BMHC's peers and leveraged consolidators of the building supply industry, I can convey an extremely high level of interest from both private equity and strategic building supply players in the acquisition of the Company... Given Lehman Brothers' current engagement to maximize the value of HD Supply, we strongly recommend that the Board engage it or an equally qualified advisor to begin discussions with prospective acquirers in earnest."

As I reported before, I have been buying BLG in small, regular chunks in anticipation of M&A activity and a hurricane season that is more active than last year and more active than what the market seems ready to accept. This filing by Chap Cap Activist Partners sent BLG up over 8% in after-hours. I was not willing to call a bottom in the stock the last time I wrote about it, but this shareholder action seems to show some real promise in getting upward momentum going in BLG. I have no ready estimate of what the entire company could be worth (it's not my expertise), but if BLG could even get half the current book value of related company Builders FirstSource (BLDR), we are looking at a 50% lift...and that just gets BLG back to the steeply declining 200DMA. Let the drama truly begin now...

Be careful out there!

DR. DURU®, 2007