Window and door manufacturer PGT Innovations has found itself in an enviable position between two companies that want to acquire the Tampa-based company.

On Dec. 18, PGT entered into a definitive agreement with Masonite valued at $3 billion. As part of the transaction, Masonite said it would pay $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.

This lucrative offer, which was the 15th such offer entertained by PGT, seemed secure until Jan. 2 when Miter Brands, a window and door company based in Gratz, Pennsylvania, presented an unsolicited bid to acquire all outstanding shares of PGT Innovations’ common stock for $41.50 per share in cash. This would equal $.50 more per share than the Masonite offer.

On Jan. 8, PGT’s board of directors announced that they were entertaining. The board said that while the unsolicited proposal “is not superior” to PGTI’s definitive agreement with Masonite, depending on the outcome of future negotiations, Miter’s proposal would “reasonably be expected to lead to a superior proposal if Miter can improve several aspects of its proposed transaction.”

“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 are worth exploring if Miter can adequately resolve several issues with its proposal,” said Jeffrey T. Jackson, president and CEO.

Should PGT accept Miter Brands’ offer, the company would be subject to an $84 million penalty to get out of the agreement with Masonite.

Principles from Masonite stand by their offer. In a statement, the board said: “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.”

According to PFT, topics to be addressed with Miter Brands, include:

• •    More value for PGTI stockholders:
•      Miter’s latest proposal provides an increase of only 1.2% in transaction consideration relative to the definitive agreement with Masonite as of December 15, 2023, and only a 4.5% increase relative to the Masonite transaction as of January 5, 2024;
• •    The modest increase in transaction consideration in Miter’s proposal compares unfavorably to the more substantial average increase in consideration provided in typical topping bids; and
• •    Further, the latest proposal would require PGTI stockholders to give up the considerable value upside potential in combining with Masonite to create a leading door and window solutions company with over $4 billion in revenue, $800 million of EBITDA, robust free cash flow generation, a rapid deleveraging profile, and ~$100 million in annual synergies from the proposed transaction.
• •    Stronger contractual protections to increase closing certainty:
• •    Miter’s proposal presents additional closing risks as compared to the pending transaction with Masonite that renders the small incremental transaction consideration insufficient to compensate PGTI stockholders for such risk;
• •    Additional contractual protections are required to ensure any proposed transaction with Miter will be consummated and deliver superior value to PGTI stockholders; and
• •    Miter’s proposal would require PGTI to pay an up-front termination fee of $84 million to Masonite – more than 2.5 times the value of the additional consideration in Miter’s proposal3 – that would not be reimbursed if a transaction with Miter fails to close. Unlike most other topping bids, Miter has failed to offer to pay this fee on PGTI’s behalf which does not reflect the customary confidence of an interloper regarding the certainty of its proposed transaction closing.

Jackson concluded: “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. Several key terms 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.”