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Masonite acquisition: changes at Laurel plant not expected

The Masonite International Corporation, whose largest manufacturing plant is in Laurel, has entered into a definitive agreement to be acquired by an affiliate of Kohlberg Kravis Roberts & Co. (KKR) in an all cash transaction worth some $2.51 billion.

Masonite is an integrated, global building products company that operates more than 75 facilities in 16 countries in North America, South America, Europe, Asia and Africa and sells its products to customers in more than 50 countries. It has some 14,000 employees.

Kohlberg Kravis Roberts & Co. is one of the world’s oldest private equity firms specializing in management buy outs, with offices in New York, Menlo Park, Calif., and London. Over the past 29 years, KKR has invested in more than 115 transactions with a total value of $138 billion.

Masonite’s shareholders will receive approximately $32.66 a share. On the New York Stock Exchange, Masonite trades as MHM.

Expansion plans for the Laurel plant — which employs some 600 people — and future growth are strong, according to Jim Morrison, executive vice president and chief operating officer of the Masonite Components Group.

“There won’t be any changes,” Morrison said. “There should be no changes evident in any of our operations.”

Morrison emphasized that the acquisition by KKR affiliate Stile Acquisition Corporation would be a good deal for employees at the Laurel plant and and for the City of Laurel.
Recent approval of a contract between Masonite and the labor union will allow Masonite to continue with future plans at the Laurel plant, Morrison said.

“Laurel employees set standards for our other plants around the world. It’s pretty much the flagship of the company from a manufacturing standpoint. Masonite is very proud of the job all of the employees in Laurel do.”

When the acquisition was proposed, Masonite’s board of directors formed a special committee of independent directors to consider the transaction. The committee’s independent financial adviser, Merrill Lynch, reported that the consideration offered in the transaction was fair, from a financial point of view, to Masonite’s shareholders.
Masonite’s board of directors unanimously approved the transaction.

The Bank of Nova Scotia has committed to provide debt financing for the transaction which, together with the equity infusion from funds managed by KKR, will provide sufficient financing to complete the transaction. Scotia Capital acted as the financial advisor to KKR.

Paul E. Raether, a member of KKR, said, “Masonite is a well-managed, well-positioned, innovative company with a global customer base. We expect Masonite to continue its expansion as a leading manufacturer of door products and look forward to working with management on the next stage of the company’s development.”

Masonite’s management team will remain in place following the completion of the transaction and will acquire some equity interest.

“Our entire management team will continue to focus on providing superior service and products to our customers worldwide,” according to Philip S. Orsino, president and CEO of Masonite.

Masonite has its corporate headquarters in Ontario and its international administrative offices in Tampa, Fla.
Masonite was founded in the early 1920s by William H. Mason, who had worked with Thomas Edison. Mason located in Laurel because of its sawmill industry. He needed the mills’ byproducts to develop a high-density wood composite product. He was successful and Masonite board became a well-known and widely-used building material.

Today, Masonite is one of the major manufacturers of door facings, sold under the Craftmaster brand. Masonite also makes other wood composite products, including MiraTEC, a premium niché siding and exterior-trim product, and a variety of industrial soft board products and other premium wood composite products.

At its peak, Laurel’s Masonite plant had some 3,000 employees and was the largest industry in Mississippi. It has been steadily down-sized but over recent years, its employment has stabilized at around 600.

KKR, founded in 1976, specializes in management buyouts and has established itself as the largest and most active participant in the industry, according to a company spokesperson. KKR’s investing activities are made on behalf of itself and its investors. These institutional investors include state and corporate pension funds, banks, insurance companies, other financial institutions and university endowments.

The company’s business is conducted by 13 members, 36 investment professionals and 18 finance and accounting executives.

Through its 29-year history, KKR has accomplished industry-wide firsts and achievements, including:

• The first billion-dollar buyout transaction: Wometco Enterprises, 1984.

• Two of the largest buyout transactions ever: RJR Nabisco, 1989, $31.4 billion and Beatrice, 1986, $8.7 billion.

• The first buyout of of a public company by tender offer: Malone & Hyde, 1984.

• The largest leveraged buyout ever in France: Legrand, 2002.

• The development of the leveraged build-up model: PRIMEDIA, 1989, and KSL, 1993.

Among KKR’s transactions last year are PanAmSat Corporation, $4.1 billion, and A.T.U. Auto-Teile-Unger Holding AG, $1.8 billion.

In 2000, Premdor Inc. acquired Masonite from International Paper Co. and utilized the Masonite name for all of its operations.

Orsino, who was president and CEO of Premdor at the time of the acquisition, said then that, “The planned combination of Masonite and Premdor will create a vertically integrated international building products company and will lead to tremendous opportunities for both Masonite and Premdor.”

Contact MBJ contributing writer at George McNeill at mbj@msbusiness.com.

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