CSL Reportedly Makes Bid for OC

Research evidence excerpt

CSL Reportedly Makes Bid for OC

ng products companies looking to bulk up, so CSL's interest in OC is not a surprise, and Source:*based onFactSet,consensusJefferiesestimates

we could see other strategics interested as well.

Chart 2 - Comp Transactions

OC shouldn't consider selling at less than 10x EV/EBITDA. Even with the stock move today, OC Buyer Target Date EV/EBITDA Valuation

is trading at ~8.9x 2026E EV/EBITDA, more like a cyclical commodity company. We have argued if AmrizeAmrize FirestoneMalarkey BuildingRoofing ProductsProducts 20212021 12.6x11.3x

Amrize Duro-Last 2023 11.9xOC can prove in a down cycle it can sustain more durable margins benefiting from the portfolio & . Carlisle Companies Henry Company 2021 13.2x

Source: Company Data, Jefferies

the structural cost actions taken, the stock should re-rate higher as investors have been fearful they

have been over earning. On our estimates before accounting for any traction on its June roofing and

insulation price increases, we have OC generating 19% EBITDA margins at the bottom of the cycle.

At OC's investor day, we believe the company provided a credible outlook for margins returning

to the mid-20's over the LT, that would be commensurate with CSL's. When looking at just OC's

roofing business, its margins are 450-500bps above CSL's. Even with the move today, OC trades at

a ~30-35% discount to CSL (~13.8x) and Kingspan (~12.5x), market leaders in commercial roofing

& insulation. Admittedly, given the majority of OC's exposure is in resi, it likely warrants a discount.

Given OC's mix of assets, there are no great public comps, but multiples ranges from 7-14x (Chart

1). That said, looking at recent take out multiples for roofing, insulation, & building envelope (Chart