Fortune Brands Home & Security Inc.
), the home and security products providing company, has agreed to
sell Simonton Windows to Ply Gem Holdings Inc. for about $130
million. Valued at about 10x 2014 EBITDA, the transaction is
expected to close in October this year following regulatory
Fortune Brands expects the sale of Simonton to cut its earnings per
share for the second half of 2014 by 2-4 cents. The company stated
that the decision to sell the windows business resulted from its
intent of focusing on its door segment comprising the Therma-Tru
entry door and Fypon home trim businesses. The company expects
these businesses to help it in further improving operating results
Fortune Brands' Therma-Tru entry door business focuses on the
growing fiberglass segment within the entry door category. Going
forward, the company presumes that Therma-Tru's product innovation,
total door system approach and strong distribution network will
continue to significantly contribute to its overall profitability.
Further, Fortune Brands believes that Simonton totally complements
Ply Gem's new construction business with its profound strength in
the replace and remodel segment of the market. It expects the
combination to enhance the company's product portfolio while
expanding its distribution network and providing a superior
national manufacturing platform.
Ply Gem Holdings Inc., which is a leading manufacturer of exterior
building products in North America, expects the acquisition of
Ohio-based Simonton to expand its windows division. The company
plans to operate Simonton as a stand-alone business with
manufacturing facilities in West Virginia, Illinois and California.
Last month, Fortune Brands reported robust second-quarter 2014
results, wherein its top and bottom line performances increased
year over year. The company reported adjusted earnings per share of
55 cents, which rose 34.1% year-over-year and came in line with the
Zacks Consensus Estimate.
On the conference call, the company revealed its plans of making
continuous investments to enhance its incremental capacity in order
to facilitate sales growth of roughly $6 million in the next 3
years. Further, the company remains focused on enhancing
shareholder value through acquisition of valuable assets and
returning excess cash in the form of dividends and share
Recent acquisitions made include Sentry Safe, a leading
manufacturer of personal safes. The company successfully closed the
acquisition for $117.5 million on Jul 29, 2014. Sentry Safe with an
estimated annual sales of $150 million will form a part of Master
Lock, the number one padlock brand in North America. The
acquisition is expected to widen the offerings of Master Lock while
adding to its leading market position and strong consumer
Other Stocks to Consider
Fortune Brands currently holds a Zacks Rank #3 (Hold).
Better-ranked stocks in the same industry include Mattress Firm
Holding Corp. (
) with a Zacks Rank #1 (Strong Buy) and Williams-Sonoma Inc. (
) holding a Zacks Rank #2 (Buy). Another stock performing well in
the broader retail sector is Citi Trends Inc. (
), sporting a Zacks Rank #1.
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