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UFPI Acquires Nepa Assets

Zacks Equity Research

A day after reporting its third quarter 2012 financial results, Universal Forest Products Inc. (UFPI) communicated a major news that is in accordance with the company’s expansionary policy — development of industrial business, entry into market without adding capacities and to grow through acquisitions. The news will likely help overcome the 12% fall in shares witnessed after the earnings release.

One of Universal Forest’s operating companies, UFP Washington, LLC, has signed agreements to acquire the operating assets of Nepa Pallet and Container Co., Inc. The addition of these assets will broaden Universal Forest’s portfolio and help the company strengthen its foothold in the Northwest United States.

The acquisition is expected to be complete by early November, 2012.

Nepa Pallet, with facilities in Snohomish, Yakima and Wenatchee, is a well known manufacturer of pallets, containers and bins for agricultural and industrial customers. Sales in the trailing twelve months were approximately $25 million.

This acquisition is Universal Forest’s second purchase in year 2012. Earlier, a subsidiary of the company had acquired some assets of Haleyville, Ala.-based MSR Forest Products, LLC. MSR Forest is a supplier of roof trusses and cut-to-size lumber to the region’s manufactured housing producers.

In a separate release, the company announced that its board of directors approved payment of 20 cents per share as a semi-annual dividend on December 15, 2012, to shareholders of record on December 1.

The Zacks Consensus Estimate for the fourth quarter 2012 is 7 cents while that for 2012 and 2013 are $1.36 and $1.93, respectively, reflecting year-over-year growth of 323.4% for 2012 and 42.4% for 2013.

Universal Forest Products Inc. manufactures, treats, distributes, and installs lumber, composite wood, plastic and other building products. The company competes stiffly with peers including Bluelinx Holdings Inc. (BXC), Builders FirstSource Inc. (BLDR), and Louisiana-Pacific Corp. (LPX).

We currently have a Neutral recommendation on Universal Forest while the stock also bears a Zacks #3 (Hold) Rank.

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