In February 2024, a buyout saga involving several door and window companies took an unexpected turn, when Owens Corning, a roofing, insulation and composites manufacturer, announced a deal to acquire door manufacturer Masonite International Corp. The deal was announced weeks after PGT Innovations dismissed Masonite from its own acquisition, leaving Masonite to collect an $84 million termination fee.

The boards of directors for both Owens and Masonite unanimously approved the transaction, which is expected to close mid-2024. But one of Masonite’s shareholders is now seeking to halt the deal, alleging that the company filed “materially incomplete and misleading” information pertaining to the proposed transaction.

On March 22, 2024, Masonite’s board authorized a filing with the U.S. Securities and Exchange Commission (SEC), recommending that Masonite stockholders vote in favor of the proposed deal. Plaintiff Kenneth Collins, one of the company’s shareholders, alleges that Masonite International Corp. and its corporate directors failed to adequately disclose material information, violating Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78n(a), 78t(a), and SEC Rule 14a-9, 17 C.F.R. §240.14a-9.

According to a complaint filed April 12, with the U.S. District Court Southern District of New York, the proxy statement filed by Masonite contains materially incomplete and misleading information concerning the company’s financial projections, the financial analyses that support the opinions provided by its financial advisors, Goldman Sachs & Co. LLC and Jefferies LLC, and conflicts of interest faced by Jefferies and company insiders. Failure to adequately disclose such material information constitutes a violation of Sections 14(a) and 20(a) of the Exchange Act, the complaint alleges. Masonite shareholders “need such information in order to make a fully informed decision in connection with the proposed transaction,” Collins suggests. The complaint lists more than 20 ways in which the company allegedly provided materially incomplete and misleading information. All nine of Masonite’s current board members are listed as individual defendants.

Collins alleges that the company’s proxy statement fails to disclose the unlevered free cash flows that Masonite was forecasted to generate during fiscal years 2023 through 2028. The proxy statement includes a summary of certain financial projections for fiscal years ending 2024 through 2028, yet “this summary fails to include the most important projections – the company’s unlevered free cash flows,” the complaint alleges. “Additionally, the proxy statement fails to disclose the prior sets of projections reviewed by the board throughout the sale process,” the plaintiff adds, and “the proxy statement fails to disclose the prior sets of projections reviewed by the board throughout the sale process.”

The alleged omission renders statements in the “Management Projections,” “Opinion of Goldman Sachs,” “Opinion of Jefferies LLC,” “Background of the Arrangement,” and “Interests of Masonite’s Executive Officers and Directors in the Arrangement” sections of the proxy statement “materially incomplete and misleading in contravention of the Exchange Act,” Collins alleges. A reasonable shareholder will consider the alleged omissions important when deciding how to vote, he suggests. The alleged false and misleading statements threaten him with “irreparable harm,” he alleges.

Collins is suing to prevent the enjoining defendants and “all persons acting in concert with them” from proceeding with the proposed deal, unless and until defendants disclose the material information identified.

In the event the deal does close, he is seeking rescissory damages. Based on the allegations included, the complaint requests that defendants be directed to file a proxy statement that does not contain what he alleges are “untrue statements,” while also seeking costs associated with legal action, including attorneys’ and experts’ fees.

A special meeting for Masonite stockholders to vote on the proposed transaction is currently scheduled for April 25, 2024.

When [DWM] reached out to Masonite, the company declined to comment.

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