Valley Forge, Pa.-based CertainTeed Corp. has resumed its place as the North American leader in vinyl siding production after its parent, Cie. de Saint-Gobain, signed a $371 million deal to acquire Owens Corning's siding and distribution operations.
The purchase of OC's Siding Solutions business includes three vinyl siding extrusion plants, in Claremont, N.C.; Joplin, Mo.; and London, Ontario.
But driving the deal was Paris-based Saint-Gobain's desire to acquire Norandex/Reynolds - Toledo, Ohio-based OC's distribution network, with 153 U.S. distribution centers in 38 states.
``We're focusing particularly on the potential distribution acquisitions in the United States,'' said Karen Cawkwell, Saint-Gobain's vice president of corporate communications, in a July 19 telephone interview. ``Clearly Norandex is not just a distributor of siding. That made it an attractive prospect for us.''
For OC, coming off a six-year stint in Chapter 11 bankruptcy, the deal represents an opportunity to refocus on core areas, said OC spokesman Jason Saragian.
``We came to the conclusion that Owens Corning was not the best owner of this business,'' he said in a telephone interview. ``To be successful, you must be a market leader. You must invest resources.
``We completed a thorough strategic review, and it became clear that Saint-Gobain was best positioned to continue the company's growth and direct its future.''
Saint-Gobain, founded in 1665, spent 330 years building its manufacturing operations in France and throughout Europe.
In 1996, everything changed.
That's when Saint-Gobain bought France's largest building products distributor, Poliet.
It followed that up with purchases of several other building products distributors during the past decade. Those deals, which have filled out its distribution network throughout Europe, include Point.P and Lapeyre la maison in France, Raab Karcher in Germany, Jewson in the United Kingdom and Dahl in Sweden.
According to a Saint-Gobain news release, the company's building distribution sector sold US$24.3 billion worth of goods in 2006. With 4,000 sales outlets in 24 countries, Saint-Gobain now is the No. 1 building products distributor in Europe.
The company is turning its focus to the United States.
``After 330 years as a manufacturing company, Saint-Gobain reinvented themselves in the last 10 years,'' said John Pruett, a principal with Exton, Pa.-based building products consulting firm Principia Partners. ``The company has been such a big part of the European industrial landscape for hundreds of years - and then, voila - it became a building materials distribution company.''
The Norandex/Reynolds acquisition has not taken industry watchers by surprise. There has been wide speculation throughout the year that Saint-Gobain was looking to enter the U.S distribution market, and the firm was linked to other potential high-profile acquisitions like Home Depot's HD Supply wholesale distribution business, which was sold to a group of private equity firms earlier this year.
Many of the large building products supply houses are among CertainTeed's largest customers, so there is potential for this deal to alienate a portion of their customers, Pruett said.
Furthermore, competing vinyl siding manufacturers like Kansas City, Mo.-based Ply Gem Industries Inc.; Columbus, Ohio-based Crane Performance Siding; and Boonesville, Miss.-based Heartland Building Products Inc. most likely will try to take advantage of the transition and earn new business.
Several competing vinyl siding makers could not be reached for comment.
CertainTeed shut down its vinyl siding extrusion operations in McPherson, Kan., in February, citing geography as it relates to projected growth markets for vinyl siding.
Cawkwell said CertainTeed will manage and operate the three OC siding plants. It is too early in the process to say what, if any, operational changes will transpire as a result of the acquisition.
CertainTeed's three remaining vinyl siding plants are in Jackson, Mich.; Hagerstown, Md.; and Social Circle, Ga. The company is still injection molding polymer shingle siding and has ramped up pipe production efforts at its McPherson manufacturing site.
The company has shown an interest in fiber cement - the No. 1 threat to vinyl siding's exterior cladding dominance. It is putting the finishing touches on a new $55-million, 370,000-square-foot facility in Terre Haute, Ind.
While Saint-Gobain's move into the U.S. distribution market has not surprised those watching the industry, Pruett said the Norandex/Reynolds acquisition will not be without its challenges.
The vast majority of Norandex's business is in vinyl siding and vinyl windows, but CertainTeed's three biggest business units are roofing, insulation and now gypsum board, after the $6.7 billion acquisition of London-based BPB plc in late 2005.
Still, Pruett said, Saint-Gobain's recent history shows it knows how to grow successfully via acquisition and geographic market expansion.
``We wanted to enter the U.S. distribution market,'' Cawkwell said. ``We feel this is an important first step.''
Domestic building materials supply houses should take note.
``Don't underestimate Saint-Gobain distribution,'' Pruett said. ``They're already No. 1 in Europe and they're coming to America.''
