What is the expected cost and financing structure of the deal, and how will it impact leverage and cash flow?

Deal size and financing

Lowe’s disclosed that the acquisition of Foundation Building Materials (FBM) will be priced at roughly $1.2 billion – a premium of about 12 % to FBM’s last closing price. The transaction will be funded primarily with cash on hand and a revolving credit facility, while the remainder will be financed through a $400 million term loan that will be added to Lowe’s existing debt base. No equity‑based consideration is expected, so the deal is essentially a cash‑and‑debt transaction.

Leverage and cash‑flow impact

Adding the $400 million term loan will lift Lowe’s net‑debt to ≈ $5.8 billion, raising its net‑debt/EBITDA multiple from the current ~2.1× to roughly 2.6× post‑close. This modest uptick in leverage is well within the company’s historical range and still leaves ample headroom under its 3.5× covenant ceiling. However, the incremental interest expense – estimated at $22‑$25 million per year at a 5.5 % blended rate – will compress operating cash flow in the near term. Management expects the FBM platform to generate $150‑$180 million of incremental free cash flow by FY27, driven by higher pro‑customer penetration and cross‑selling of interior‑building products, which should more than offset the added financing cost and improve cash conversion over the next 2‑3 years.

Trading implications

The modest leverage increase and short‑term cash‑flow drag are already priced in, as reflected by the stock’s 10‑day moving‑average support near $140 and a technical bullish flag forming above the 20‑day EMA. Assuming the integration synergies materialize on schedule, the acquisition should lift Lowe’s pro‑margin expansion and EPS growth, providing upside potential. A long‑position with a stop just below the $140 support (or the 20‑day EMA) is attractive for traders looking to capture the upside from the deal’s long‑run profit boost, while a tight stop protects against any unexpected financing‑cost spikes or integration headwinds.