Fortune Brands to Sell Windows Business to Ply Gem for $130M - Analyst Blog

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Fortune Brands Home & Security Inc. ( FBHS ), 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 approvals.

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 in 2015.

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 repurchases.

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 worldwide.

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. ( MFRM ) with a Zacks Rank #1 (Strong Buy) and Williams-Sonoma Inc. ( WSM ) holding a Zacks Rank #2 (Buy). Another stock performing well in the broader retail sector is Citi Trends Inc. ( CTRN ), sporting a Zacks Rank #1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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