Masonite International (a leading global designer, manufacturer, marketer, and distributor of interior and exterior doors and premium door systems) and PGT Innovations (a designer and manufacturer of patio door and premium window solutions, and recognized leader in technically advanced products for impact-rated glass applications) recently announced a definitive agreement under which Masonite will acquire PGT Innovations for a combination of cash and Masonite shares with a total transaction value of $3 billion.
Under the terms of the agreement, PGT Innovations shareholders will receive $41 per each PGT Innovations share they own, which is comprised of $33.50 in cash and $7.50 in common shares of Masonite. And the per share consideration represents a premium of approximately 24% to PGT Innovations’ 30-day volume-weighted average share price. Upon completion of the deal, Masonite shareholders will own approximately 84% of the combined company, with PGT Innovations shareholders owning approximately 16%.
The addition of PGT Innovations empowers Masonite with complementary product offerings in adjacent categories, additional geographies, expanded routes to market and cross-selling opportunities, enhanced engineering and manufacturing capabilities, and a significantly stronger growth and financial profile. The deal is expected to deliver meaningful earnings per share (EPS) accretion and significant synergies with minimal investment required to integrate the two businesses.
Strategic/Financial Benefits:
1.) Creates a premier door and window company with substantial depth – Masonite and PGT Innovations have extensive product expertise across all of the major openings in the home, including interior doors, exterior doors, hinged and sliding patio doors, non-impact and impact-resistant windows, and garage doors. This brings together the companies’ highly complementary products, provides significant growth and cross-selling opportunities with whole-home solutions, and strengthens Masonite’s customer value proposition in serving the growing indoor/outdoor living trend.
2.) Transforms Masonite’s scale and capabilities – On a pro forma basis for the last 12 months ended October 1, 2023, the combined company had a financial profile with over $4 billion in revenue, about $700 million of adjusted EBITDA, and over $400 million of free cash flow, without giving effect to expected synergies. Plus, Masonite’s expanded capabilities as a result of the transaction are anticipated to drive significant operating efficiencies and, in combination with its enhanced product and innovative offerings, deliver industry-leading growth and returns.
3.) Significantly accelerates growth profile – By adding attractive and high-growth complementary products and sales channels with meaningful cross-selling potential, the combination will provide an enhanced growth profile for Masonite to expand its customer base as it explores new routes to market for the combined product portfolio. And the combined company will have a highly attractive geographic footprint across many high-growth metropolitan areas, including in Texas and Florida. Acquiring PGT Innovations – with the company’s decade-long track record of double-digit annual revenue growth – will expand Masonite’s total addressable market and increase its expected future revenue growth by approximately 200 bps.
4.) Unlocks opportunity for significant synergies – Masonite expects to realize about $100 million in annual synergies over the next several years following the deal’s close. And these synergies represent a combination of cost-savings opportunities such as efficiencies in corporate overhead and public company costs, raw material and sourcing opportunities, manufacturing network cost optimization, and incremental sales growth opportunities like cross-selling complementary product offerings to an expanded customer base.
5.) Strong earnings accretion and combined cash flows – The anticipated combination of accelerated growth, significant synergies, and rapid de-leveraging following the deal’s completion is expected to drive meaningful future earnings growth for Masonite. And the deal is expected to accrue to Masonite’s EPS in the first full year of ownership and accelerate thereafter with the realization of synergies. Masonite plans to utilize the strength of the combined company’s cash flows and enhanced margin profile to reduce its leverage to below 3.0x in approximately two years post-close.
Leadership and Governance
- Howard Heckes will continue to serve as CEO of Masonite.
- At the closing, Jeff Jackson, PGT Innovations CEO, and one additional PGT Innovations director will join the Masonite Board of Directors.
Terms
The Boards of Directors of Masonite and PGT Innovations have each unanimously approved the transaction. The deal is currently anticipated to close in the middle of 2024, subject to approval by the PGT Innovations shareholders, as well as the receipt of required regulatory approvals and satisfaction of other customary closing conditions.
Masonite plans to fund the cash portion of the merger consideration with a combination of cash on hand, borrowings under existing credit facilities, and the proceeds from new debt and/or equity financing. And Masonite has received $1.8 billion in senior secured term loan commitments and $980 million in bridge loan commitments from Jefferies Finance LLC and Sumitomo Mitsui Banking Corporation in connection with the deal. At the closing, Masonite estimates that the pro forma net leverage will be approximately 4.1x. Masonite intends to reduce its leverage to below 3x in approximately two years post-close.
KEY QUOTES:
“The acquisition of PGT Innovations accelerates our strategy and is an exciting and transformational step in the nearly 100-year history of Masonite. The combined business will be well positioned to provide homeowners with differentiated solutions across both the interior and exterior openings of the home, while significantly expanding our geographic presence and growth opportunities. The PGT Innovations team shares our commitment to innovation and delivering premium products and is tightly aligned to the three strategic pillars that guide Masonite: delivering reliable supply, driving product leadership and winning the sale. I look forward to welcoming the talented PGT Innovations employees to Masonite and unlocking the many opportunities this combination presents to deliver compelling long-term value to our customers, employees, partners and shareholders.”
- Howard Heckes, President and Chief Executive Officer of Masonite
“Today’s announcement is a significant milestone for PGT Innovations, and a testament to the talent and dedication of our team members around the country. This transaction will provide significant near-term value to PGT Innovations’ shareholders, while also enabling them to participate in the long-term upside opportunity of the combined company. Over the past few years, PGT Innovations has successfully advanced our strategic priorities: expanding our brands, supporting trends shaping the industry, scaling our business and investing in profitable growth. We have a strong foundation, including our indoor-outdoor portfolio, from which to contribute to Masonite, and look forward to continuing to deliver operational excellence and product innovation for customers as part of the Masonite team.”
- Jeffrey T. Jackson, President and Chief Executive Officer, PGT Innovations
