Fortune Brands to Break Up into Separate Businesses
Simonton Windows and Therma-Tru Doors will be part of a new company focused on home and security products, as Fortune Brands Inc., plans to separate its three main business units. Its board of directors has voted to maintain Fortune Brands as a publicly-traded distilled spirits company, spinning off its home and security unit as an independent publicly-traded company with a tax-free sale to shareholders.
The company's management has been directed to develop detailed separation plans for consideration and final approval by the board. The company expects to complete development of these plans–including the structure, timing, and other related matters for each business–within the next several months.
“We’re excited that Simonton Windows is positioned for continued growth as a market leader in the new Home & Security business that’s being developed,” says Mark Savan, Simonton president. “The new structure will provide us with excellent opportunities for our brand to be a key participant in a stand-alone publicly-traded company purely focused on the home products market.
“While details are still being finalized, we anticipate this exciting development will take place within the next six to nine months," Savan continues. "During and after the transition we expect no changes in our operations. Every Simonton associate will continue to focus on providing the same top-quality products and services in the future as we offer to our customers today.”
As a business unit, Fortune Brands Home & Security LLC has annual sales exceeding $3 billion, the company reports. Therma-Tru, officials note, is the #1 entry door brand in the U.S., and Simonton, one of the largest vinyl window producers in the U.S. Both are said to be "well positioned in the attractive advanced materials segments of their categories." The unit's largest single brand is Moen, said to be the #1 faucet brand in North America. MasterBrand Cabinets, which includes brands such as Aristokraft, Decorá, Diamond, Omega and Kitchen Craft, is said to be the strong #2 cabinet manufacturer in North America. Finally, Master Lock is reported to be world's #1 brand of padlocks and related security products, while Waterloo is a leading company in the storage and organization products market.
“The premier brands in the current Fortune Brands Home & Security group will serve as the cornerstones of an exceptional new company,” adds Savan. “At Simonton, we’re looking forward to building upon our strong market position as an industry leader. The value and service proposition we provide to our customers nationwide will continue to be our primary focus in the future.”
According to Fortune Brand officials, the home and security business has enhanced its position by playing offense during the downturn and front end of the recovery. The company has created lean and flexible supply chains by both reducing costs and accelerating productivity initiatives. Significant new business wins, excellent customer service and successful new-product innovations have contributed to meaningful market share gains. With this momentum, combined with the company's supply-chain flexibility and efficient cost structures, the unit will have substantial leverage and upside growth and returns potential as the U.S. housing market recovers, it is said.
Fortune Brands' spirit business reports $2.5 billion in annual revenue. Its brands include Jim Beam, Maker's Mark and Knob Creek bourbons; Canadian Club whisky and Laphroaig and Teacher's Scotch; Sauza, Hornitos and El Tesoro tequila; and Courvoisier cognac. With annual sales of $1.2 billion, Fortune Brands' golf business produces Titleist and Footjoy brand products.
"We are taking the next logical step in the evolution of Fortune Brands, which we believe will maximize long-term value for our shareholders and create exciting opportunities within our businesses," says Bruce Carbonari, Fortune Brands chairman and CEO. "Today's announcement is the result of an ongoing strategic review process conducted by the board and management over the past four years that included regular evaluation of separating the businesses at the right time to serve the best interests of our shareholders. While the breadth and balance of our portfolio have served shareholders very well, we see the potential for even greater value by separating our businesses into focused companies at a time when they have emerged from the economic downturn in such strong positions. We believe now is the right time to move ahead with this tax-efficient approach, and we're confident the course we've outlined today generates greater potential long-term value than all other alternatives."
Carbonaari states that proactive strategic initiatives and targeted investments have enabled each of Fortune Brands' businesses to emerge from the economic downturn stronger than had been anticipated. "We have tremendous confidence in the future of each of our businesses," he continues. "These businesses now have the management, infrastructure and growth and returns prospects to flourish apart from one another and build on their solid foundations of premier brands, leading market positions and strong capital structures. This action plan will enable our shareholders to participate in the substantial upside we expect each of these businesses to generate as they compete in attractive consumer categories with excellent long-term fundamentals."