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Inside Masonite’s playbook for $285M acquisition

Tampa-based door manufacturer Masonite International Corp. is entering the outdoor patio space – a sector the company values between $4 to $5 billion. 

The new move follows Masonite’s (NYSE: DOOR) announced purchase of California-based Fleetwood Aluminum Products in a $285 million all-cash transaction. 

Fleetwood, a family-owned business, designs and manufactures premium, aluminum-framed glass doors and windows for luxury homes. 

With the adjusted tax benefits from the transaction, the purchase price equates to $255 million, President Howard Heckes said during a Wednesday earnings call with investors. 

“The acquisition allows us to more effectively address the large patio door market and indoor/outdoor living trend, but with a focus on premium aluminum-framed glass segments, which we view as being differentiated from the mainstream sliding vinyl patio door segments,” Heckes said.

Masonite, founded in 1925, currently serves approximately 7,000 global customers. 

“The acquisition provides us an immediate portfolio lift to our best products,” Heckes said. “The current management team at Fleetwood will continue to operate the business independently.” 

Fleetwood operates a 200,000-square-foot manufacturing facility and serves as the HQ with roughly 350 employees. 

The majority of Fleetwood’s revenue, or 70% of sales, is driven by West Coast customers purchasing doors. The remaining 30% of revenue is generated by the sale of matching glass panels, which are fixed to the doors. 

“They had unusually strong results in 2023 due to a large backlog of orders from supply chain restraints of the prior year. In 2024, we expect Fleetwood to normalize with an estimated $150 million in net sales and $35 million in adjusted EBITA [earnings before interest, taxes and amortization],” Heckes said. 

Last November, Masonite acquired Endura Products, leading manufacturer of high-performance door frames and door system components, in a $375 million all-cash deal. 

“Any company that fits this profile allowing us to execute our strategy is going to be important to us as we look at future M and A [mergers and acquisitions],” Howard said. 

Endura has 800 employees across four facilities located in North Carolina, Texas and Oregon. Endura’s products are sold to distributors located throughout the U.S. and Canada. 

The Masonite executive team said the Endura acquisition is helping them offer weather-sealing components for engineered door frames and security locks, furthering their move into the patio space. 

Short-term headwinds and long-term confidence 

Masonite’s third-quarter results show a decrease in overall net sales stemming from the challenges in today’s housing market, but the team is hopeful the sector will bounce back. 

The company’s consolidated net sales were $702 million, a 4% decrease resulting from a 13% decline in volume partially offset by an 8% increase from the Endura acquisition and a 1% increase in average unit price (AUP).

“This decline was slightly greater than what we were anticipating at the time of our Q2 earnings call,” Masonite CFO and Executive VP Russ Tiejema said. He cited how homebuilders were more optimistic about macroeconomic conditions improving quickly and inflation slowing down. 

The North American residential division represented $553 million of the net sales, a 5% decrease, while sales in Europe, primarily in the U.K., reflected $65 million, an estimated 2% decrease. 

However, Tiejema explained the company had a $310 million cash flow – a new record despite headwinds, and said,”material inflation has broadly stabilized, and inbound logistic costs have declined.” 

The post Inside Masonite’s playbook for $285M acquisition first appeared on St Pete Catalyst.

The post Inside Masonite’s playbook for $285M acquisition appeared first on St Pete Catalyst.