- September 26, 2024
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Editor's note: The end of September marks six months since one of the biggest sales ever of a homegrown Sarasota County company: Pennsylvania-based Miter Brands buying PGT Innovations of Venice for $3.1 billion. This story is a look back at the complicated saga that led to the deal closing March 27.
Jeff Jackson was curious — and maybe a little concerned.
It was fall 2022. The Venice publicly traded window and door manufacturer he was CEO of, PGT Innovations, in his words, was killing it. Revenue was nearing $1.5 billion for the year, up 29.3% from $1.16 billion in 2021. Net income was up 269% from 2021, to $98.9 million. And the firm’s profit margin was 6.6%, up from 2.3% in 2021.
But an unknown entity was accumulating stock of the company. This entity had stealthily gone from owning 3% of the company’s shares to 4.8%. If an investor buys more than 5% of a company’s stock, the entity has to disclose who they are under SEC regulations. That could be an activist investor, angling for dramatic change, or maybe a company looking to buy PGT. Jackson leaned toward the latter, since an activist investor wouldn’t normally target a company doing so well.
The PGT leadership team, says Jackson, decided to spend $1,500 on a service that finds out who secret investors are. Turns out the unknown entity was a company Jackson knew well: Miter Brands, a Harrisburg, Pennsylvania window and door company that traces its history, in part, to post-World War II Florida.
PGT, says Jackson, actually considered buying Miter a few years ago. “We looked at it hard,” he says. “We just couldn’t come to an agreement on the numbers.”
Jackson was surprised Miter was accumulating PGT stock. And he confronted Miter President and CEO Matt DeSoto and his brother, COO Mike DeSoto, about it at an industry trade show a few weeks later. After some pleasantries, Jackson told the brothers, with a sly wink and a tint of sarcasm, “‘thanks for confidence in us.’”
That December 2022 conversation kicked off a year-plus odyssey that led to Miter — after fending off competition from other suitors and raising its offer more than 60% in nine separate bids — closing on the deal to buy PGTI March 27. Matt DeSoto, though a company spokesperson, has declined to comment on the acquisition. But in a June podcast produced by PGTI University called Clear Impact, DeSoto says the PGT acquisition is “like a dream come true.”
Jackson says the PGTI board was not in sell-mode in 2021 when calls started to flood the company about potential acquisitions. He took one call, he recalls, on his cell while driving to work on Bee Ridge Road. “The board looks at every offer because they have a fiscal responsibility” to shareholders, says Jackson. “But there was no reason to sell. We were doing amazing. We made some mistakes, but we had built an incredible business.”
Getting to incredible took some aggressive acquisitions, first in Florida. Growing in the Sunshine State before going national was a lesson Jackson learned from former Coca-Cola CEO Doug Ivester, when Jackson was an up-and-coming executive in the beverage giant, working out of its Atlanta headquarters.
“I was just a grunt in the boardroom, but Doug would always say ‘not in our backyard.’ That was key. He would say ‘I don’t want to drive around Atlanta and see a Pepsi anywhere. I don’t want to go to a restaurant and see Pepsi. I took the philosophy that Florida was ours. We had a goal to dominate Florida. Anytime an acquisition came up in Florida. We wanted to be involved.”
PGT executed on that strategy, buying businesses such as Miami-based CFG Windows & Doors Holdings Inc. for $111 million in 2014. It later went outside Florida, buying Phoenix-hased Western Window Systems for $360 million in 2018 and Martin Doors in Salt Lake City in October 2022 for about $185 million, among other deals. It also grew through acquisition on the west coast of the state, buying Tampa-based new South Windows in early 2020 for $92 million.
For Miter, meanwhile, the idea of buying PGTI went back to at least 2017 — even before Miter had formed over the Koch-aided merger. PGTI was a $511 million company back then.
Matt DeSoto, in the June PGTI University Clear Impact podcast, recalled he and his brother and their father, also in the window business, had dinner with Jackson and PGT co-founder Rod Hershberger in Sarasota in 2017. The DeSotos were back at the Marriott Courtyard in Sarasota, after dinner, when his father said “‘it would be really cool if we could figure out somehow, some way to put MI, Milgard and PGT together,’” Matt DeSoto said on the podcast “So this whole journey has really been many years in the making.”
But it wasn’t only the DeSotos and later Miter Brands courting PGTI. In the March 18 proxy document, prepared for a shareholder vote on the Miter deal, PGTI says it fielded 17 acquisition proposals from 2021 through late 2023. In that time, the company says, it “contacted or otherwise interacted with 12 unique financial and strategic parties.”
One offer came in September 2021 for $26.50 per share. That entity, listed as Party A in the proxy, raised its offer to $28.25 in May 2022. The PGTI board rejected those offers, saying the price undervalued the company.
Some 10 months later. Miter Brands officially entered the acquisition picture.
First, in March 2023, Jackson and Matt DeSoto agreed to meet to “discuss a potential business combination and an offer would be made to acquire PGTI,” the proxy states. But before that April meeting, PGTI, the proxy states, learned that Miter and its affiliates had “accumulated at least 7% (and possibly 8% or more) of PGTI common stock, including through derivative positions.”
DeSoto, in response, told PGT that Miter “did not intend to commence a hostile bid” for the company and would instead present an offer to the board by the end of April 2023.
That same month Jackson began to field calls for a potential acquisition from another entity: Tampa-based Masonite International, a manufacturer and distributor of interior and exterior doors. But an offer from Masonite, also publicly-traded like PGT, remained at least eight months away.
In May more offers came rolling in, from multiple entities, the proxy shows, going up to $32, then $33 a share. By October, the national business press began to write about a potential acquisition. Reuters, for one, published an article Oct. 10, 2023 reporting PGTI had rejected a $33.00 per share offer from Miter and that Miter was considering raising its bid to $36.00 per share.
Then, when Miter raised its offer a fourth time PGTI, believing it was still too low, “decided to propose a counteroffer of $40 per share.”
On Nov. 1, 2023, the proxy report says Jackson called DeSoto about the $40 a share counteroffer. “DeSoto told Mr. Jackson that if PGTI received an offer for $40, PGTI ‘should take it,’” the proxy states. Miter’s financial advisors, the proxy adds, then told PGTI “as one of your largest stockholders, if you have an offer that starts with a 4, we encourage you to take that offer.”
PGTI eventually received that kind of offer — from Masonite. That came a week before Christmas, when news broke Masonite offered a $3 billion deal for PGTI. The offer was $41 per share, broken down to $33.50 in cash and $7.50 in Masonite common shares.
PGT agreed to the deal. A press release was issued that an agreement was reached.
But the Masonite deal never got to closing.
Over the holidays, Miter came back with another offer. This offer was for $42 a share. The Masonite offer represented a premium of 56.5% over PGTI’s Oct. 9 closing price of $26.20. The Miter offer was a 60% premium.
A few more calls between PGTI’s team of bankers and lawyers and Miter’s team of bankers and lawyers came next. And then came the ninth, and final offer. While the price remained $42 a share for offer No. 9, other stipulations were added. That ninth offer, too, came four months after another offer from Miter — No. 6. That sixth offer, the proxy states, was supposed to be the company’s “best and final” offer, for $38.25 a share.
One last point: Miter had to agree to pay an $84 million fee that came from PGTI canceling the Masontie deal. Miter’s $3.1 billion offer, in total, was up 63.1% from that first official Reuters-reported offer of $1.9 billion in October 2023.
Then, finally, the deal was ready for shareholders, and ultimately closing.
The simple sentence in the 116-page proxy statement belies the drama that led to that point. “Before the opening of NYSE normal trading hours on January 17, PGTI and MITER issued a joint press release announcing the merger agreement and the termination of the Masonite merger agreement.”
