White Cap Stock Shows 34% Gain on 1st Trading Day

By JOHN O’DELL

Oct. 23, 1997 12 AM PT

TIMES STAFF WRITER

COSTA MESA —

Shares of White Cap Industries Inc. surged 34% Wednesday during the Costa Mesa company’s first day of trading.

White Cap, which operates a chain of warehouse stores selling construction supplies and tools to contractors, sold 4 million shares of stock in its initial public offering. The stock, priced at $18 a share to underwriters, advanced throughout the day to close at $24.13 in heavy trading on the Nasdaq market.

The stock’s strong debut was fueled by bullish prospects for the construction industry, as well as the company’s own upbeat prospectus showing that same-store sales advanced 28% in the fiscal 1997 fourth quarter ended March 31.

The company, founded in 1976 by former grocery store executive Greg Grosch, operates 20 retail stores in the Western United States and sells to contractors through a catalog of more than 25,000 items.

Grosch, who still owns 26.2% of the company, saw the value of his nearly 2.7 million shares jump to $65.1 million during the day. The company’s offering prospectus says Grosch and other executives, who collectively own 58% of the company, obtained their shares early in the company’s history for an average price of 53 cents per share.

“We’re all really excited,” Grosch said of the strong market performance. “We’re looking forward to moving ahead.”

Prospects are bright for companies like White Cap because the Western construction market is rapidly rebounding after a six-year slump. Tools and supplies are in demand by contractors, as well as new workers who are being added to contractors’ payrolls to handle the increased business.

Economists at Cal State Fullerton said this week that they expect the value of new construction in Orange, Los Angeles, Ventura, Riverside and San Bernardino counties to hit $15.8 billion next year. That’s an increase of 26% from the anticipated 1997 total of $12.5 billion and nearly double the $8.3 billion recorded at the bottom of the building industry recession in 1993.

White Cap has said it plans to use the bulk of its $67 million in proceeds from the initial public offering to pay off debts. But it intends to use up to $75 million of a $100-million bank credit line to help it take advantage of the building boom by acquiring other tool and supply retailers.

Growth through acquisitions has been an important part of White Cap’s business strategy.

In the first half of this year alone, the company spent $37 million to buy three Northern California contractor supply houses with a total of nine stores.

The company reported a 1996 profit of $2.8 million and revenue of $101.8 million. In a filing with the Securities and Exchange Commission, White Cap said those recent acquisitions should boost sales to $165 million and profits to more than $5 million this year.

Additionally, White Cap has agreements pending to acquire two other contractor supply companies with 10 branches in the Western states and a total of $30.3 million in sales.

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White Cap Goes Public

White Cap Industries’ stock rose 34% in its first day of trading. Details on the firm and its initial public offering:

Headquarters: Costa Mesa

Chairman/president/CEO: Greg Grosch

Business: Sells specialty tools and materials to building contractors

Employees: 640, including 106 in Costa Mesa

Locations: 20 in California, Arizona, Colorado and Nevada

Exchange: Nasdaq

Shares sold: 4 million

Net proceeds: $67 million

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