Owens Corning announces $3.9 billion acquisition of Masonite to strengthen position in building and construction materials

Owens Corning, a leader in global building and construction materials, and Masonite International Corporation, a leading global provider of interior and exterior doors and door systems, announced they have entered into a definitive agreement under which Owens Corning will acquire all outstanding shares of Masonite for $133.00 per share in cash, representing an approximate 38% premium to Masonite’s closing share price on February 8, 2024 and an approximate 46% premium to Masonite’s 20-day volume-weighted average price. The implied transaction value is approximately $3.9 billion, implying a purchase multiple of approximately 8.6x 2023E adjusted EBITDA2 or 6.8x when including synergies of $125 million.

The addition of Masonite’s market-leading doors business creates a new growth platform for Owens Corning, strengthening the company’s position in residential building materials and extending its offering of highly valued products and brands. Leveraging Owens Corning’s unique commercial capabilities and proven go-to-market model serving contractors, builders, and distributors, the company expects to build on Masonite’s strong track record of innovation, brand quality, and category excellence to further grow in the doors market.

Founded in 1925, Masonite designs, manufactures, and markets doors and door systems, with a vertically integrated manufacturing model serving both repair and remodel and new construction demand. Masonite operates 64 manufacturing and distribution facilities, primarily in North America, and has over 10,000 employees globally.

“We are excited by this opportunity to add a scalable new growth platform for our company,” said Brian Chambers, Board Chair and Chief Executive Officer of Owens Corning. “Masonite is a market leader that complements our existing residential interior and exterior product offering and has consistently demonstrated top-line growth and margin expansion. The combination of our commercial, operational, and innovation capabilities allows us to accelerate our long-term enterprise growth strategy with a clear line of sight to meaningful synergies and increased cash flow generation. We look forward to welcoming the talented Masonite team to Owens Corning and working with them to deliver enhanced value to customers and shareholders.”

“Our world-class team is transforming the door industry with differentiated solutions for the home,” said Howard Heckes, President and Chief Executive Officer of Masonite. “The combination with Owens Corning enables the acceleration of our Doors That Do More™ strategy, while delivering immediate and substantial value to our shareholders. This agreement brings together two storied companies with a common focus on innovation and making life better at home for the people who use our products every day. As we begin our next chapter after nearly 100 years in business, I am looking forward to Masonite joining the Owens Corning team.”

Strategic and Financial Benefits

• Expands Owens Corning’s leadership position in branded residential building products: The acquisition of Masonite and entry into doors adds a highly complementary line of innovative products and advances Owens Corning’s strategy to expand its building materials offering in residential applications. Both companies provide best in class products and brands, focus on building strong customer partnerships, and differentiate through quality, service, sustainability, and innovation. With the acquisition, Owens Corning’s revenue generated from North American residential applications will grow to 60% of its total revenue.

• Creates scalable new growth platform leveraging combined commercial, operational, and innovation capabilities: Owens Corning expects to leverage both companies’ best in class brands, extensive customer and channel knowledge, manufacturing excellence, and material science expertise to grow Masonite’s top-line reaching adjusted EBITDA margins of approximately 20%. The acquisition also increases Owens Corning’s total addressable market by $27 billion and creates a platform to drive new growth opportunities in other product adjacencies.

• Enhances Owens Corning’s attractive financial profile: With this transaction, Owens Corning grows revenue to $12.6 billion, with adjusted EBITDA of $2.9 billion on a synergized pro forma basis1 and with reduced ongoing capital intensity. Owens Corning expects cost synergies of approximately $125 million annually, generated through scale and operational savings, with the majority realized by the end of Year 2 post-close. The acquisition drives meaningful shareholder value creation with ROIC exceeding Owens Corning’s cost of capital by the end of Year 3 post-close.

• Generates strong free cash flow to support rapid deleveraging and capital allocation strategy: On a synergized basis, the acquisition is expected to be low double-digit percentage accretive to free cash flow by the end of 2025. After accounting for transaction financing, Owens Corning expects net debt-to-EBITDA well within its stated 2-3x target range, deleveraging to 2.0x by year-end 2024. Owens Corning is committed to maintaining its solid investment grade rating and returning approximately 50% of free cash flow to shareholders over time.

Transaction details, timing, and approvals

The transaction will be implemented by way of a statutory plan of arrangement pursuant to the Business Corporations Act (British Columbia). The Boards of Directors of both companies have unanimously approved the transaction. The transaction is expected to close mid-2024, subject to Masonite shareholder approval, regulatory approvals, and other customary closing conditions including the issuance of interim and final orders by the Supreme Court of British Columbia approving the plan of arrangement. The transaction will be financed by cash on hand and committed debt financing of $3 billion provided by Morgan Stanley Senior Funding, Inc.

Following the closing, Masonite will operate as a reportable segment and will maintain Masonite’s brands and a presence in Tampa, Florida.