(Reuters) - Beacon Roofing Supply Inc (BECN.O) will buy roofing products distributor Roofing Supply Group in a deal valued at about $1.1 billion, to expand in key housing markets of California, Florida and Texas.
Beacon, which has a market value of about $1.5 billion, will acquire Roofing Supply from investment firm Clayton, Dubilier & Rice.
Shares of Beacon were up 13 percent at a year high of $33.99 on the Nasdaq in early trading.
U.S. construction suppliers are benefiting from burgeoning demand with the housing market well into its fourth year of recovery after the financial crisis.
States in the U.S. south and southwest have led the comeback in homebuilding, helped by some of the country's strongest job rates.
As a result of the acquisition, Clayton, Dubilier & Rice will own about 15 percent of the pro-forma company and will also have two seats on the board of the combined company, Beacon said on a conference call.
The deal will increase Beacon's revenue to about $3.7 billion and give the company greater access to 45 states and six provinces across Canada, it said. Beacon reported revenue of $2.33 billion in 2014.
The acquisition of Roofing Supply, which has presence in 24 U.S. states, provides Beacon access to the Pacific Northwest.
The deal will boost Beacon's presence in California by 75 percent and in Texas and Florida by as much as 50 percent, the company said.
Roofing Supply was acquired by Sterling Group in 2006. Clayton, Dubilier & Rice bought Roofing Supply from Sterling in 2012.
Dallas-based Roofing Supply, which distributes to contractors, builders, architects and building owners in the United States, reported revenue of $1.1 billion for 2014.
The transaction is expected to add immediately to adjusted earnings, Herndon, Virginia-based Beacon said.
Roofing Supply shareholders will receive about $286 million in cash and $291 million of Beacon common stock, and Beacon will refinance about $565 million of Roofing Supply's net debt.
The transaction, expected to close on Oct. 1, is expected to generate about $50 million in annual run-rate cost synergies.
Beacon said it does not expect clearance issues from regulatory bodies.
Reporting by Radhika Rukmangadhan in Bengaluru; Editing by Maju Samuel