Ply Gem Industries Inc. has joined the ranks of the top-tier window manufacturers by agreeing to buy CertainTeed Corp.'s window business for an undisclosed sum.
The deal is scheduled to close by the end of the third quarter. When it does, Kansas City, Mo.-based Ply Gem will gain an extrusion and fabrication plant in Auburn, Wash.; two California fabrication plants, in Sacramento and Corona; some extrusion lines from a CertainTeed plant in Hagerstown, Md.; and capacity at six separate East Coast window manufacturers that make and sell CertainTeed-brand windows.
Valley Forge, Pa.-based CertainTeed's window unit employs about 1,000.
``We see a trend of consolidation in the vinyl window industry,'' said Thierry Denis, vice president and general manager of CertainTeed's Window Products Group. ``We had to decide if we wanted to be one of the consolidators, or find another way to grow the business.
``We decided, strategically, it made more sense to actually divest from the activity and reinvest in other areas that strategically make more sense for us,'' Denis said in an Aug. 23 telephone interview.
In the world of consolidating industries, a line has been drawn separating the acquirers from the divestors. Ply Gem's position has become clearly defined. After spending $120 million and $305 million in 2006 on the Alenco window business and Alcoa Home Exteriors, respectively, Ply Gem has made another bold purchase with the CertainTeed deal.
Ply Gem is owned by private equity group Caxton-Iseman Capital Inc. in New York, which bought the building products giant in 2004.
The acquisition will be financed through cash and a $75 million revolving credit facility, Ply Gem said in a news release.
The CertainTeed business will open up further market opportunities in the West, said Gary Robinette, Ply Gem's president and chief executive officer, in a news release.
``This transaction will enable Ply Gem to provide our customers with window products for virtually any new construction or home improvement project in any area of the country,'' he said.
Ply Gem officials, reached by phone, declined to comment until the deal is closed.
Nick Limb, managing partner with Ducker Research Co. Inc. in Bloomfield Hills, Mich., called Ply Gem's and CertainTeed's window operations ``a good fit.''
``Ply Gem takes a big step up and becomes a top player,'' Limb said. ``They were already big, but they have taken that leap now to the top tier.
``It fits well with that portfolio. [Ply Gem-owned MW Windows & Doors] is a volume player. CertainTeed has product range and geography.''
There remain several hundred window companies, so the window industry's consolidation trend is far from over, he said.
The industry has taken a bit of a drubbing during the ongoing housing slump.
``This is a 10-year low point,'' Limb said. ``Clearly the market is going through a big correction. But the long-term demand is still strong. There is a huge oversupply of inventory.
``Is it a good time to buy? Is it a good time to sell? It all depends on the price, right?''