HOUSTON and CARY, N.C., July 17,
2018 /PRNewswire/ -- NCI Building Systems, Inc. (NYSE:
NCS), a leading manufacturer of exterior building products for
commercial construction ("NCI"), and Ply Gem Parent, LLC, a leading
manufacturer of exterior building products for residential
construction ("Ply Gem"), announced today that they have signed a
definitive agreement under which the two companies will combine in
a stock-for-stock merger. The combined company ("the Company") will
have a pro forma enterprise value of $5.5
billion and an implied equity value of $2.6 billion, based on NCI's closing share price
on July 17, 2018.
NCI Chairman James S. Metcalf,
who will lead the integration of the two companies and serve as
Chairman and CEO of the Company, said: "This transformational
combination creates the leading exterior building products company
with multiple avenues for further growth. Both companies are
experiencing sustained momentum driven by meaningful cost savings,
and the greater scale and diversification of the combined company
support organic growth, margin expansion and longer-term M&A
opportunities. With a greater ability to attract and retain top
talent in all fields, our combined company will continue to
innovate in the exterior building products space – far beyond what
either of us could do alone."
COMPELLING STRATEGIC RATIONALE FOR THE
COMBINATION
The transaction will create a market-leading North American
exterior building products platform providing new construction and
repair & remodel solutions for commercial and residential
applications. As a larger, vertically-integrated manufacturer with
enhanced growth opportunities through adjacent products, the
combined company will become a one-stop solution for exterior
building envelope needs.
- Expansive, advantaged customer platform: Improved ability to
serve customers with a broader product portfolio across multiple
end markets. Complete go-to-market coverage across direct,
distribution and retail customers.
- Superior growth and financial profile: Multiple avenues for
growth spanning core market expansion, product innovation,
cross-selling and multifaceted M&A opportunities. Increased
diversification of end markets and raw materials reduces earnings
volatility. Ongoing cost initiatives and identified near-term cost
synergies totaling over $150 million
annually.
- Shared strengths and best-in-class capabilities: Combined
strengths in advanced manufacturing, product innovation and cost
efficiency coupled with shared acquisition integration and
cross-selling capabilities. Strong cultural fit with a focus on
continuous improvement.
- Long-term, results-driven stewardship: Experienced leadership
teams with a proven track record of integration and execution.
Substantial investment from funds managed by Clayton, Dubilier
& Rice ("CD&R").
The Company will operate under a name to be determined, and each
entity will preserve its existing established brands. The Company
will be headquartered in Cary, North
Carolina, with a significant presence in Houston, Texas.
Ply Gem Chairman and CEO Gary E.
Robinette, who will continue to serve in this role until
close, added: "I am grateful and honored to have had the
opportunity to lead Ply Gem over the past 12 years and I am proud
of our team's accomplishments during the past decade of successes
and challenges. The joining of these two market-leading
exterior building products companies creates a platform for growth,
enhanced innovation and cost improvements, while serving all
channels of the construction markets. I am excited for the
associates and customers of the combined company and the next
evolution of this best-in-class provider of exterior building
envelope solutions."
NCI CEO Donald Riley, who will
continue to serve in this role until close, noted: "This scalable
platform is well-positioned to create shareholder value through
improved margins, additional cost savings and expanded market
penetration. The opportunity for growth through cross-selling and
adjacencies to each other's customers is a major advantage of this
transaction. Furthermore, both of our companies are strong in new
construction and Ply Gem also excels at repair and remodel, adding
to our combined end market diversification and providing further
room for growth."
FINANCIAL HIGHLIGHTS
Under the terms of the agreement, NCI will issue 58.7 million
shares to Ply Gem shareholders. Upon the close of the transaction,
NCI shareholders will own 53% of the Company's common equity, with
Ply Gem shareholders owning 47%. The transaction is generally
expected to be tax-free to the Ply Gem owners for U.S. federal
income tax purposes.
On a combined basis for calendar year 2018, the Company is
expected to generate revenue of approximately $4.5 billion and Pro Forma Adjusted EBITDA of
$660 million - $680 million, including run-rate synergies and
cost savings. The Company expects that, after three years following
close, cost reduction initiatives and merger-related synergies will
yield over $150 million in annual
cost savings. Clearly scoped standalone cost reduction initiatives
are already well underway at both NCI and Ply Gem.
Combination-specific synergies include manufacturing efficiencies
and procurement and general & administrative savings. The
transaction is expected to be immediately accretive to adjusted
cash earnings per share and free cash flow.
The Company will generate strong free cash flow and maintain a
flexible balance sheet, with ample liquidity and cash flow to
invest in growth and pay down debt. The Company's pro forma capital
structure will include Ply Gem's existing $1,755 million senior secured term loan and Ply
Gem's existing $645 million of senior
unsecured notes, each of which will be assumed by the Company
following completion of the transaction. The Company also expects
to incur a $475 million incremental
term loan in connection with the transaction, the proceeds of which
will be used to retire NCI's existing term loan, repay any amounts
outstanding under NCI's existing revolving facility and pay
transaction fees and expenses. The Company will retain Ply Gem's
existing $475 million in aggregate
asset-based and cash flow revolving facilities, and plans to
increase Ply Gem's existing asset-based revolving facility by
$215 million to provide additional
working capital capacity as well as replace NCI's existing
asset-based revolving facility.
GOVERNANCE AND MANAGEMENT
James S. Metcalf, current
Chairman of NCI, will become Chairman and CEO of the Company. Mr.
Metcalf served as Chairman and CEO of USG Corporation from 2011 to
2016 and joined the NCI Board in 2017 and became Chairman in
2018.
Donald Riley, current CEO of NCI,
will serve as CEO of the Company's NCI Division. Gary Robinette will continue to serve as
President, Chairman and CEO of Ply Gem until the transaction is
completed, after which he will serve as Chairman Emeritus and
Special Advisor to the Company. Shawn
Poe, current CFO of Ply Gem, will serve as CFO of the
Company.
The Company's management team has proven integration experience
and a demonstrated ability to create value through revenue growth
and cost savings, evidenced by successful recent integrations with
CENTRIA and Simonton Windows & Doors by NCI and Ply Gem,
respectively. In addition, the Company's management team has
delivered market-leading growth rates in multiple areas throughout
various market cycles in both the residential and commercial
markets.
Funds managed by CD&R will own just under 50% of the
Company's common equity and will designate five directors to the
Company's 12-person Board of Directors. Golden Gate Capital, a
significant shareholder of Ply Gem, will own approximately 16% of
the Company's common equity.
"We believe the merger creates attractive and profitable new
growth avenues in the North American exterior building products
market for the combined company," said Nathan K. Sleeper, Partner at CD&R, who will
serve on the Board of Directors of the Company. "There is an
enormous value creation opportunity in joining these two industry
leaders in terms of delivering operational synergies and enhancing
the platform to better serve the Company's customers, broaden its
product portfolio, drive innovation and pursue significant
opportunities for organic and inorganic growth. We look forward to
working with and supporting the management team to realize these
goals."
The transaction has been unanimously approved by a special
committee of independent directors formed by NCI's Board of
Directors and by NCI's full Board (without participation of
directors affiliated with CD&R, NCI's largest shareholder).
TIMING AND APPROVALS
The transaction is expected to close in the fourth calendar
quarter of 2018, subject to approval by NCI shareholders and
customary regulatory approvals.
ADVISORS
Evercore is serving as exclusive financial advisor and Wachtell,
Lipton, Rosen & Katz is serving as legal counsel to NCI. Credit
Suisse is serving as exclusive financial advisor to Ply Gem.
Debevoise & Plimpton is providing legal counsel to Ply Gem and
to CD&R. Credit Suisse and RBC Capital Markets, LLC are
providing committed financing for the transaction.
CONFERENCE CALL / WEBCAST AND FURTHER
INFORMATION
NCI and Ply Gem will host a joint conference call with investors
on July 18, 2018 at 8:00 am Eastern time to discuss this transaction.
Please dial 1-412-902-0003 or 1-877-407-0672 (toll-free) to
participate in the call. The call will also be webcast at
www.ncibuildingsystems.com. To access the taped telephone replay,
please dial 1-201-612-7415 or 1-877-660-6853 (toll-free) and the
passcode 13681656# when prompted. The taped replay will be
available two hours after the call through August 1, 2018. A replay of the webcast will be
available on the Event Calendar, Calls & Webcast section of the
Investor Relations page of the NCI website for approximately 90
days.
For further information regarding all terms and conditions
contained in the definitive merger agreement, please see NCI's
Current Report on Form 8-K, which will be filed with the U.S.
Securities and Exchange Commission (SEC) in connection with this
transaction. An investor presentation and prepared remarks, which
will also be filed with the SEC, can be found on the Investor
Relations page of NCI's website:
www.ncibuildingsystems.com/investors.html.
About NCI Building Systems, Inc.
NCI, headquartered in Houston,
TX, is one of North
America's largest integrated manufacturers of metal products
for the commercial building industry, selling products such as
metal wall and roof systems, insulated metal panels, roll-up doors,
trim, accessories and engineered commercial buildings. NCI has
approximately 5,300 employees across 38 manufacturing locations
throughout North America. For more
information, visit www.ncibuildingsystems.com.
About Ply Gem Holdings, Inc.
Ply Gem, headquartered in Cary,
NC, manufactures and sells a variety of products focused on
the exterior envelope of single and multi-family homes. Ply Gem's
key products include windows, doors, siding, roofing, metal
accessories, stone and other adjacent products. Ply Gem employs
approximately 11,600 people across 35 facilities in North America. CD&R acquired Ply Gem in
April 2018 and concurrently merged it
with Atrium Windows & Doors, a manufacturer of residential
windows and doors. For more information, visit
www.plygem.com.
About Clayton, Dubilier & Rice
Founded in 1978, Clayton, Dubilier & Rice is a private
investment firm. Since inception, CD&R has managed the
investment of $26 billion in more
than 80 companies with an aggregate transaction value of more than
$100 billion. The Firm has offices in
New York and London. For more information, visit
www.cdr-inc.com.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE
SEC
In connection with the proposed transaction, the Company will
file a proxy statement of the Company with respect to the obtaining
of stockholder approval for the transaction. The Company also
plans to file other documents with the SEC regarding the proposed
merger. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ
CAREFULLY AND IN THEIR ENTIRETY THE PROXY STATEMENT (INCLUDING ALL
AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER DOCUMENTS RELATING TO
THE PROPOSED MERGER THAT WILL BE FILED WITH THE SEC WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE COMPANY, PLY GEM AND THE PROPOSED MERGER. A
definitive proxy statement will be sent to the Company's
stockholders. Stockholders will be able to obtain free copies
of the proxy statement and other documents containing important
information about the Company and Ply Gem, once such documents are
filed with the SEC, through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the
SEC by the Company will be available free of charge on the
Company's internet website at www.ncibuildingsystems.com under the
tab "Investors" and then under the tab "SEC Filings" or by
contacting the Company's Investor Relations department at (281)
897-7785.
PARTICIPANTS IN THE SOLICITATION
The Company and its respective directors and executive officers
may be deemed to be participants in the solicitation of proxies
from the Company's stockholders in connection with the proposed
merger. Information about the persons who may be deemed to be
participants in the solicitation of the Company's stockholders in
connection with the proposed merger, including a description of
their direct and indirect interests, by security holdings or
otherwise, will be set forth in the Company's definitive proxy
statement and other filings with the SEC when they are filed with
the SEC. Information about the directors and executive officers of
the Company and their ownership of the Common Stock is set forth in
the definitive proxy statement for the Company's 2018 annual
meeting of stockholders, as previously filed with the SEC on
January 26, 2018 . Free copies
of these documents can be obtained as described in the preceding
paragraph.
NON-SOLICITATION
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there by any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction.
FORWARD-LOOKING STATEMENTS
Certain statements and information in this filing may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The words "believe,"
"anticipate," "plan," "intend," "foresee," "guidance," "potential,"
"expect," "should," "will" "continue," "could," "estimate,"
"forecast," "goal," "may," "objective," "predict," "projection," or
similar expressions are intended to identify forward-looking
statements (including those contained in certain visual depictions)
in this filing. These forward-looking statements reflect the
Company's current expectations and/or beliefs concerning future
events. The Company believes the information, estimates, forecasts
and assumptions on which these statements are based are current,
reasonable and complete. Our expectations with respect to the first
quarter of fiscal 2018 and the full year fiscal 2018 that are
contained in this filing are forward-looking statements based on
management's best estimates, as of the date of this filing. These
estimates are unaudited, and reflect management's current views
with respect to future results. However, the forward-looking
statements in this filing are subject to a number of risks and
uncertainties that may cause the Company's actual performance to
differ materially from that projected in such statements. Among the
factors that could cause actual results to differ materially
include, but are not limited to, industry cyclicality and
seasonality and adverse weather conditions; challenging economic
conditions affecting the nonresidential construction industry;
volatility in the U.S. economy and abroad, generally, and in the
credit markets; substantial indebtedness and our ability to incur
substantially more indebtedness; our ability to generate
significant cash flow required to service or refinance our existing
debt, including our secured term loan facility, and obtain future
financing; our ability to comply with the financial tests and
covenants in our existing and future debt obligations; operational
limitations or restrictions in connection with our debt; increases
in interest rates; recognition of asset impairment charges;
commodity price increases and/or limited availability of raw
materials, including steel; costs relative to maintenance or
replacement of our enterprise resource planning technologies; our
ability to make strategic acquisitions accretive to earnings;
retention and replacement of key personnel; our ability to carry
out our restructuring plans and to fully realize the expected cost
savings; enforcement and obsolescence of intellectual property
rights; fluctuations in customer demand; costs related to
environmental clean-ups and liabilities; competitive activity and
pricing pressure; increases in energy prices; volatility of the
Company's stock price; potential future sales of the Company's
common stock held by our sponsor; substantial governance and other
rights held by our sponsor; breaches of our information system
security measures and damage to our major information management
systems; hazards that may cause personal injury or property damage,
thereby subjecting us to liabilities and possible losses, which may
not be covered by insurance; changes in laws or regulations,
including the Dodd–Frank Act; and costs and other effects of legal
and administrative proceedings, settlements, investigations, claims
and other matters; timing and amount of any future stock
repurchases. In addition to these factors, we encourage you to
review the "Risk Factors" set forth in the Company's Annual Report
on Form 10-K for the fiscal year ended October 29, 2017, and the other risks and
uncertainties described in documents we file from time to time with
the SEC, which identify other important factors, though not
necessarily all such factors, that could cause future outcomes to
differ materially from those set forth in the forward-looking
statements contained in this filing. The Company expressly
disclaims any obligation to release publicly any updates or
revisions to these forward-looking statements, whether as a result
of new information, future events, or otherwise.
NON-GAAP FINANCIAL MEASURES
This document includes certain non-GAAP measures, including
Adjusted EBITDA and free cash flow (collectively, the "Non-GAAP
Measures"). These Non-GAAP Measures are performance measures
that provide supplemental information that NCI and Ply Gem believe
are useful to analysts and investors to evaluate ongoing results of
operations, when considered alongside other GAAP measures such as
net income, operating income and gross profit. Such measures are
not prepared in accordance with U.S. GAAP and should not be
construed as an alternative to reported results determined in
accordance with U.S. GAAP. These Non-GAAP Measures exclude the
financial impact of items management does not consider in assessing
the ongoing operating performance of NCI, Ply Gem or the combined
company, and thereby facilitate review of its operating performance
on a period-to-period basis. Additional information
regarding these Non-GAAP measures are available in previously
disclosed SEC filings of NCI. The appearance of Non-GAAP Measures
in this presentation should not be construed as an inference that
its future results will be unaffected by unusual or non-recurring
items.
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SOURCE NCI Building Systems, Inc.