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PGT Captures Deal in Active Building Products Space

By Alexandra Garfinkle

Impact-resistant windows and doors supplier PGT Innovations Inc. (PGTI) on Tuesday, Dec. 10 agreed to acquire energy-efficient windows and doors manufacturer NewSouth Window Solutions LLC.

The $92 million cash deal, which PGT expects to close in the first quarter of 2020, is the company’s only add-on of 2019, though the Venice, Fla.-based acquirer — a leader in the residential windows and doors sector with an $814 million market cap — does have some deal history in the fragmented building products industry.

In July 2018, PGT Innovations acquired WWS Acquisition LLC, which does business as Western Window Systems, from Perella Weinberg Partners LP for $360 million.

For its part, Tampa, Fla.-based NewSouth, known for its direct-to-consumer model, expects to generate between $82 million and $85 million in 2019 net sales, with an “Ebitda margin in the mid-teens,” according to PGT’s Tuesday statement.

PGT Innovations CFO Sherri Baker told The Deal via e-mail that the company was attracted to “opportunities for cost synergies in procurement and operating efficiencies,” and the target’s digitally savvy business model, as well as its “ability to reach consumers with relatively smaller order sizes than what our typical existing dealer currently services.”

PGT Innovations acquisition comes during a time of strong M&A activity in the building products space, though some players in the industry have also faced pressure to shrink or shift portfolio strategy by activist investors.

The Deal recently labeled a number of construction companies activist targets, including engineering and construction firm Fluor Corp. (FLR). PGT Innovations may have the makings of an activist target, as well. The company recently released what CEO Jeff Jackson called a disappointing third quarter earnings report, and its stock was down almost 12% in 2019 through Thursday.

Six members of PGT Innovations’ 9-person board have served in their roles for more than 12 years, according to relationship mapping service BoardEx, a sister company of The Deal.

Meanwhile, private equity-backed companies in the industry that are potentially ripe for a takeover include H.I.G. Capital LLC-backed Empire Today LLC and Linsalata Capital Partners Inc.-backed A. B. Property Services Inc.

On Tuesday’s transaction, PGT Innovations tapped SunTrust Robinson Humphrey Inc. for financial guidance, while Jones Day provided legal advice.

NewSouth turned to Raymond James & Associates Inc. for financial advice and Natalie Annis of Foley & Lardner LLP for legal counsel.

NewSouth did not immediately return a request for further comment.