PGT Innovations Inc. officials say they are considering an acquisition proposal from Miter. The new proposal follows the late-December announcement that Masonite had signed a definitive agreement to acquire PGTI in a $3 billion deal.
PGTI announced that its board of directors has unanimously determined that, while the unsolicited proposal from Miter Brands to acquire all outstanding shares of PGTI common stock for $41.50 per share in cash is not superior to PGTI’s definitive agreement to be acquired by Masonite International Corp., depending on the outcome of future negotiations, Miter’s proposal would reasonably be expected to lead to a superior proposal if Miter is able to improve several aspects of its proposed transaction.
PGTI entered into a definitive agreement to be acquired by Masonite for $41.00 per share, comprised of $33.50 in cash and 0.07353 shares of Masonite common stock, representing a premium of approximately 56.5% over the closing price of PGTI common stock of $26.20 per share on October 9, 2023.
What PGTI says
“While the PGTI Board of Directors believes the transaction with Masonite remains the best option to maximize value for our stockholders, the improved consideration and near-term value certainty in a potential all-cash transaction with Miter is worth exploring if Miter is able to adequately resolve several issues with its proposal,” says Jeffrey T. Jackson, president and chief executive officer.
PGTI is seeking to address in discussions with Miter more value for PGTI stockholders and stronger contractual protections to increase closing certainty.
“To be clear, we have not concluded that the proposed Miter transaction is superior to our binding transaction with Masonite, and we are not committed to a transaction with Miter. There are several key terms that would need to be negotiated satisfactorily before we would be in a position to recommend a Miter transaction over the Masonite transaction. Rather, we are planning to engage in discussions with Miter since we believe there is a reasonable basis for concluding that it would result in a superior proposal for PGTI stockholders.”
Next Steps
The PGTI Board’s determination that the Miter proposal would reasonably be expected to lead to a superior proposal allows the two companies to negotiate improved terms of a binding acquisition proposal by Miter. If PGTI and Miter are able to negotiate a transaction on terms that the PGTI Board concludes is a superior proposal, Masonite would have the option, over a period of four business days, to offer to improve the terms of its existing merger agreement with PGTI.
Thereafter, if the PGTI Board determines that Miter’s offer is a superior proposal, after taking into consideration any improved terms offered by Masonite, only then would PGTI enter into an agreement with Miter and would there be an obligation to pay Masonite the termination fee. Until that time, the definitive agreement with Masonite remains binding and in full effect, and the PGTI Board reaffirms its existing recommendation of the transaction with Masonite.
What Masonite says
In a separate statement, Masonite officials reiterated the benefits of the acquisition.
“Masonite remains fully committed to the transaction with PGT Innovations Inc. on its current terms and is confident that the definitive merger agreement, a result of thorough due diligence and careful negotiation by both the Masonite and PGTI Boards, reflects a full and fair value for PGTI and its shareholders. In addition to compelling value, Masonite’s agreement also provides a high degree of transaction certainty; Hart-Scott Rodino filings have already been made and Masonite and PGTI continue to pursue a swift path to closing," Masonite officials say in a statement.
"The transaction will create a leading door and window solutions company with substantial depth and breadth and a strengthened growth and financial profile. Bringing the two companies together will establish an attractive geographic footprint, transform Masonite’s scale and capabilities, drive significant operating efficiencies and deliver industry-leading growth and returns for shareholders of both companies."
According to officials, the combination of Masonite and PGT Innovations offers:
Financial Benefits
- $33.50 in cash for PGTI shareholders plus the unique ability to participate in the powerful upside growth potential of the business with approximately 16% ownership of the combined company through the receipt of Masonite stock;
- Approximately 200 basis points increase in future revenue growth rate and an expanded total addressable market;
- Approximately $100 million in carefully considered and thoughtfully detailed annual cost and revenue synergies phased in over two and four years, respectively, following the close of the transaction;
- Meaningful accretion to Masonite’s earnings per share in the first full year post-close; and
- Creation of a scaled business delivering strong cash generation to support our commitment to de-lever below 3x in the two years following close.
Strategic Benefits
- Customer base expansion for both Masonite and PGTI across a wide geographic footprint including many high-growth metropolitan areas;
- Significant cross-selling opportunities leveraging Masonite’s attractive nationwide wholesale distribution and big box retail relationships and PGTI’s direct to dealer and consumer routes to market;
- Demonstrated commitment to investing in innovation to offer consumers whole-home solutions that improve life and living;
- Scale, resources and brand recognition provided as part of a larger, more diverse company; and
- Highly complementary product portfolios providing a more certain pathway to close.
