$1.63 billion is all it takes to become America’s largest building materials supplier.

In a massive deal, Builders FirstSource Inc. will acquire ProBuild Holdings in an all-cash transaction.

It took ProBuild nearly 10 years to become big enough to buy. The company was created in 2006 by an investment group and grew to one of the largest distributors of building materials with operations in 40 states. In 2014, its revenue was $4.5 billion.

Floyd Sherman, CEO of Builders FirstSource, says with the U.S. economy rebounding, now was the best time to make the acquisition.

“We are very pleased to announce this compelling combination with ProBuild to create a more diversified company with enhanced scale and an improved geographic footprint that will drive significant value for our customers and stockholders,” he says. “As the U.S. housing market continues its recovery, we believe now is the ideal time to position Builders FirstSource for its next phase of growth and value creation … Each of our companies has complementary strengths, and we plan to learn from each other by implementing best practices across the combined company.”

Highlights of the deal, according to a company release, include:

  • A diversified national dealer with 2014 combined revenues of approximately $6.1 billion;
  • An improved geographic footprint—including a presence in 40 states and every one of the top 25 U.S. metropolitan areas except Boston;
  • Expanded sales of higher margin products; and
  • Cost savings of $100 to $120 million in annual cost-savings synergies in the first two years following close (following one-time costs of $90 to $100 million).

Michael Collins, managing director of Building Industry Advisors, an investment group that provides merger and acquisition advisory services says though the deal is of historic proportions, he doesn’t see the Federal Trade Commission (FTC) putting it to a halt.

“Even the combined size of them relative to the overall industry,” which he says seems to be a $120 billion industry, “they won’t have pricing power. The FTC’s worried about pricing power.”

Collins says there is one place the FTC may step in: regional distribution.

“Looking at it at a city-by-city basis, they may say the company has to divest a location in a certain city or region. A lot of times, companies will be born from those types of FTC requirements. But I think it’ll get through,” he says.

Upon closing of the transaction—which is subject to conditions and regulatory approvals—Floyd Sherman will serve as CEO of the combined company and Chad Crow will serve as chief financial officer. Robert Marchbank, CEO of ProBuild, will continue as part of the ProBuild leadership team to support integration planning and work the transitioning phase. According to a company statement, additional announcements will be made regarding the combined company’s senior leadership team in the coming months.

The deal is expected to be finalized in the second half of 2015.

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