Pass the Catchup:

It’s good to be desired. Or at least that’s what the latest news from a buyout saga suggests about PGT Innovations Inc. (PGTI). Last week the company announced it had a third offer from Miter Brands (MI Windows and Doors, Milgard Windows and Doors), after it already penned a deal with Masonite International Corp. Despite the deal with Masonite, officials for PGTI said the company’s board would weigh the potential of an alternate buyout. Monday, the company announced it was rejecting Miter’s latest offer after determining that it wasn’t as good as the current agreement with Masonite. But the deal may not be over, as officials for PGTI said they’re leaving the door open. In a press release issued Monday, the company detailed what might entice it to swipe right for Miter on yet another deal. Among the board’s primary pet peeves is an up-front termination fee of $84 million, payable to Masonite, should PGTI accept a new deal. That’s 2.5 times the value of the additional consideration in Miter’s proposal, PGTI’s board determined.

“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,” said Jeff Jackson, PGTI’s president and CEO.

According to PGTI officials, Miter’s latest offer provides an increase of 1.2% in transaction consideration, relative to the agreement with Masonite as of December 15, 2023, and a 4.5% increase relative to the Masonite transaction as of January 5, 2024 (following changes in stock value).

The upside in Miter’s latest offer falls short of “the more substantial average increase in consideration provided in typical topping bids,” officials for PGTI suggested.

The latest proposal would also require PGTI stockholders to “give up the considerable value upside potential in combining with Masonite,” they added.

“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,” Jackson said. “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.”

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