Why Window Company PGT Innovations Shares Are Surging Today

PGT Innovations Inc PGTI and Masonite International Corp DOOR shares are rising and declining, respectively, today following the acquisition deal. 

As per the deal, doors maker Masonite will acquire PGT Innovations, a designer and manufacturer of patio door and window solutions, for a combination of cash and Masonite shares for a total value of $3.0 billion.

As per the terms of the agreement, PGTI shareholders will receive $41.00 per share they own, comprising $33.50 in cash and $7.50 in common shares of Masonite. 

The per-share consideration represents a premium of about 24% to PGT Innovations' 30-day volume-weighted average share price. 

Post transaction completion, Masonite shareholders will own about 84% of the combined company, with PGT Innovations shareholders taking the rest. 

With the inclusion of PGT Innovations, Masonite will have complementary product offerings in adjacent categories and key geographies, expanded routes to market and cross-selling opportunities, and enhanced engineering and manufacturing capabilities.

Howard Heckes, President and Chief Executive Officer of Masonite stated, "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." 

On a pro forma basis for the last twelve months ended October 1, 2023, the combined company had a financial profile with over $4 billion in revenue, adjusted EBITDA of around $700 million, and free cash flow of over $400 million, without giving effect to expected synergies. 

PGTI will boost Masonite's total addressable market and increase its expected future revenue growth by about 200 bps.

The transaction is expected to close in the middle of 2024, subject to approval by the PGT Innovations shareholders, receipt of required regulatory approvals, and satisfaction of other customary closing conditions.

Post deal-closure, Masonite expects to realize annual synergies of about $100 million phased in over the next several year.

The deal is expected to be accretive to Masonite's EPS in the first full year of ownership and accelerate thereafter with the realization of synergies. Masonite intends 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.

At the end of Q3, DOOR had a total available liquidity of $663 million, including $360 million in unrestricted cash and $303 million in availability under its ABL Facility and AR Sales Program.

Also Read: These Analysts Lower Their Forecasts On Masonite Following Q3 Results

Price Action: PGTI shares are up 8.8% at $39.28, and DOOR shares are down 13.14% at $88.60 on the last check Monday.

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