Masonite Stock Soars. Doors Maker Is Being Bought by Owens Corning.

The deal is expected to close in “mid-2024,” according to
Owens Corning
management.

Owens Corning stock was down 4.7% in premarket trading while
S&P 500
and
Nasdaq Composite
futures were up 0.2% and 0.3%, respectively.

This isn’t a stock-based deal, so arbitrageurs aren’t trying to lock in a spread. Instead, investors might be worried about added debt. Owens Corning will use $3 billion in debt financing provided by
Morgan Stanley
to complete the deal.

Owens Corning is known for its pink insulation. Masonite makes doors. Both sell into the residential construction marketplace.

Residential construction spending in the U.S. is roughly a $1 trillion industry. Spending is up about 10% from 2023 lows, but still down about 6% from 2022 peak levels.

Post deal, Owens Corning will have sales of about $12.6 billion, with adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, of about $2.9 billion including expected annual synergies of some $125 million.

That leaves the combined company trading for about 6.6 times the estimated Ebitda, including synergies. Owens Corning today trades for about 7.5 times. Masonite trades for about 7 times Ebitda. The deal, excluding synergies, values the company at about 9 times synergies.

The S&P 500 trades for closer to 14 times. Both Owens Corning and Masonite stocks haven’t traded at a market-like multiple historically.

“We are excited by this opportunity to add a scalable new growth platform for our company,” said Owens Corning CEO Brian Chambers in a news release. “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.”

Management will host a conference call at 8:30 a.m. to discuss the deal.

Write to Al Root at [email protected]